National Australia Bank's plotting a global effort to offer payments products to other institutions during a particularly rough time to pry new capital from IT shops that already have a lot of payments firms to choose from.
To give it a better shot, the bank hopes to leverage its development partnership with Australian tech firm Distra, which would give the offerings a combination of NAB's retail expertise and brand recognition and Distra's architecture.
"In the current climate, many financial institutions around the globe face the challenge of building a business case to replace core legacy [payments] technology," says Steve Aliferis, regional general manager of Working Capital Services, National Australia Bank, a $500 billion Melbourne-based institution that has thus far avoided the losses of some other global banks, though it recently reported first half profits will drop about 15 percent.
NAB, which wouldn't releases its payments volume but said its merchant acquiring market is about a quarter of its total business, believes it has a leg up providing the business case Aliferis speaks of because the bank and tech firm have already built payments capabilities for NAB's own customers.
Distra's technology utilizes open platforms without third party clustering or replications technology; and distributed architecture that provides a replicated, scalable and fault-tolerant operating environment for enterprise class payment applications, placing its capabilities on par with most new payments systems offered by Western tech firms.
The dual product suite that's part of the expansion efforts will initially focus on ATM, POS (landline, IP, mobile, contactless), e-commerce, medical claims processing and data processing, though other joint products will likely be added in the future based on the forward-looking intelligence gained by the firms' experience. "Part of the alliance is about developing features that we anticipate institutions out there will need," says Mike Ashton, CEO of Distra in Sydney.
One basic anticipated need is replacing the legacy payments platforms that still exist at many institutions as consumer and corporate payment tastes expand into new, automated and increasingly wireless modes. "These legacy platforms have done a good job, but fortunately for us the amount of change, such as regulations, competition, new innovation and new channels has stretched the capabilities of the legacy platforms," Ashton says.
As a payments IT provider, Distra will by no means be operating in a vacuum as it moves into new markets. ACI - whose clients include Bank of America, ING, and CIBC; Fidelity Information Services; and S1 are all among the well-heeled and well-penetrated electronic payments providers doing business in Europe and North America. Distra's ties to NAB, a major global bank, will give it some recognition, particularly among Canadian banks that closely follow the Australian market. NAB would also not be alone - Citi and BONY Mellon are among the North American-based institutions that offer white labeled payments technology to other institutions.
But analysts says core payments overhauls remain a daunting task in a budget-challenged environment. "Changing systems is an expensive undertaking," says Bart Nartar, senior analyst at Celent. "That's especially true of payments systems, which after core systems talk to more parts of the bank than any other."