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The Payments Hub Spectrum: A model for the design of payments hubs

Gary S. D. Farrow, Director, Triari Consulting


Abstract
Recent events in the financial sector have given a high profile to financial services governance. In the area of payments, there is a need to provide transparency and traceability of monetary movements. Other changes in the market environment include the strengthening of regulations and the introduction of new euro zone payments frameworks. The credit crunch further highlighted the need to monitor systemic risk exposure associated with settlement — especially for the major clearing banks that process payments for their agency banks. This article describes a specialised IT component — the payments hub — and the design considerations in meeting the current payments industry business drivers. A conceptual model of a payments hub is introduced and its business benefits described. The functional capabilities of a payments hub are presented, categorised into three areas: process services; business services; and integration services. The technical justification for a hub is presented, highlighting its role in reducing integration complexity and in supporting modernisation initiatives within a bank. The ‘Payment Hub Spectrum’ is introduced, describing an ordered range of functional services. Depending on the specific business needs of a bank and its underlying IT systems landscape, these are shown to dictate a functionally light or a functionally rich payments hub. The business and technical factors affecting the position on this spectrum are highlighted. In conclusion, the Payments Hub Spectrum is shown to be a useful model for solution analysis, informing the architectural decisions on technology choice and on the apportionment of payments processing capability between the key collaborating components.

Keywords
payment services hub, payment hub design, payments integration, liquidity management, payments capability model


Gary Farrow is Director of Triari Consulting, provider of systems integration and IT architecture services for the financial sector. A lead architect on many projects, he has undertaken senior architect roles at major banks. He has broad expertise in large-scale systems integration, enterprise service bus architectures and service-oriented architecture (SOA) and deep domain specialism in payments systems. He has written many articles on SOA and payments processing. Gary is a member of the IT Architecture Certification Board for the Open Group and is an Associate Lecturer at the Open University. Professional qualifications include Member IET, Chartered Engineer and Open Group Master Certified Architect. He holds BSc and PhD degrees from Manchester University and a Certificate in Business Administration from Warwick Business School, UK.


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