International Business Machines Corp. is zeroing in on the payments industry as part of a revamped banking technology strategy.
The Armonk, N.Y., technology vendor said it has formed a Global Center of Competence to focus on payments issues. The intent is to bring together IBM's existing consulting and technology resources to address customer needs in a concerted fashion, said James Methe, the Center of Competence Payments Solutions executive.
"We now have one center … for delivery whether it's a bank in China with a branch in New York or a New York bank with a branch in China," Methe said in an interview Thursday. "They're going to receive the same consistent story from IBM."
The new payments center falls under IBM's Banking Center of Excellence, which was formed in 2007 and also focuses on core banking, risk and compliance, and financial markets and front-office issues.
Last year IBM announced the formation of the Banking Industry Framework, a software initiative aimed at helping banks with systems integration also in the areas of risk management, customer information, payments and core banking.
Putting more emphasis behind payments specifically is a smart move because the market itself is so big, said Gwenn Bezard, a research director with the Aite Group LLC research firm in Boston.
"It's a bigger part of the story," Bezard said. "There has been a recurring recognition over the past 10 years that payments is an industry on its own."
IBM's new approach "speaks to IBM … stepping up their domain expertise," he said.
The new payments center has about 45 consultants and IBM plans for it to have up to 300 employees by the end of next year. Those employees will support the entire banking operation, Methe said. Many of the new hires will be for locations in China and India, an IBM spokeswoman said.
"What we've come together with is the solutions that banks are requiring from us," Methe said. "They're not interested in just … the hardware platform that can get the scalability and throughput they need. It's really around bringing in subject-matter experts."
Tying together its consulting expertise with its products should help IBM be better equipped to address its clients at the executive level, Methe said.
That is an important distinction because decisions to invest in new technology or revamp existing systems are not relegated to the individual tech divisions within banks and payments companies, Bezard said.
"If a large bank in the United States … decides to replace a core banking system, it's going to be a strategic decision made by the CEO and the [executive] management," Bezard said. "It's not going to be a decision made by the chief technology officer."
Making the case to the CTO is "good but it's not enough," Bezard said. "You need to be able to speak to the chief executive of the bank who may not have any clue about IT."
Phil Philliou, a partner with the payments consulting firm Philliou Selwanes Partners LLC in New York, said focusing on payments is an obvious move given the activity around mobile technology and alternative systems but said there are also objectivity issues for clients to consider.
"There's some benefit there" but "they're not going to be pushing Oracle databases when they could be pushing some sort of IBM product," Philliou said.
