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Case Study: Wachovia
Applying science to the payments world
December, 2005
International Banking Systems Journal
Following
are excerpts of a case study that appeared in the December, 2005 edition of
International Banking Systems Journal. The case study was part of a feature article titled “Payments Check-Point”.
Wachovia is among those banks in the US plotting and analysing their payments activities. Don MacLeod, executive vice president and director of payment strategies at the bank, is in charge of a group specifically created to develop and manage a corporate-wide strategy to maximize the value of Wachovia’s payments environment. The US payments business is complex and difficult to understand, explains MacLeod. The picture is ‘very fragmented’ with many forms of payments used by corporate and personal customers. That fragmentation is reflected in Wachovia’s infrastructure. It’s 20 to 30 payments systems is probably about par for the course for a bank its size. Each of the systems is really a big black box, he says.
The bank is seeking to understand the impact of new technologies on its payments business. For example, if checks continue to decline at a rate of five to eight per cent per annum, what will be the implications on Wachovia’s revenues if – for instance – 30 per cent of the business migrates to debit cards, 30 per cent to credit cards, and the rest to some form of automated clearing house? The bank would like to be able to model a range of scenarios, such as a steeper decline in checks, or different percentages for the uptake of alternative payments.
A key problem is the sheer volume of data that has been collected over the years, with this coming from multiple sources. Some work can be done on spreadsheets, but this is limited and often becomes unmanageable. There are many levels, says MacLeod, significant amounts of data, parallel scenarios, and a need for robust modelling capabilities. Wachovia is now implementing a modelling system, with this sourced from Carreker Corporation. The bank has worked with the supplier to refine the system, dubbed PaymentsLink, for its own requirements. Importantly, he says, there is the ability to load accurate and representative information about costs. The system will allow the bank to understand the cost and revenue implications as payment volumes shift, analysing product information across customers, geographies, and timelines. |
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