This Research Note focuses on TowerGroup’s analysis of the overall noncash payment trends found in the 2010 Federal Reserve Payments Study and their implications for FSIs and technology providers. This study was the fourth in a series of triennial studies conducted by the Federal Reserve. The study and its subcomponents, released in December 2010 and April 2011, examined payment volume and value for the following noncash payment vehicles: check, automated clearing house (ACH), online (PIN) and offline (signature)debit card, general-purpose credit card, prepaid cards and emerging payments including bill pay and P2P.

This Research Note summarizes and explores the results of a TowerGroup online survey of transaction banking executives in all regions across the globe. This survey, conducted in July 2011, focused on investment priorities relateding to transaction banking technology and processes for both regional and /or global businesses. It captures high-level organizational technology priorities for the next 2 years in transaction banking (including delivery channels, back-office systems, risk management applications to support cash/treasury management, and trade finance).

Increased demand for new services, restrictions on fees, added compliance costs, and a low interest rate environment are impacting bank profits. Although large US banks are implementing new checking account fees, community banks have maintained their free account policy.

TowerGroup believes it is critical for community banks to implement checking fees both to restore profitability and avoid backlash from new customers. This ViewPoint highlights the need for community banks to implement fees on checking accounts and discusses how these fees can be implemented while minimizing customer attrition.

The ability of banks to better orchestrate their resources in a collaborative manner will become a major determinant of who will win in tomorrow’s industry. Banks are facing growing challenges from new market entrants using uniquely interactive approaches, a marketplace fraught with changing demographics and evolving tastes, and increased customer expectations for human and social interaction as elements of business conduct. All this comes at a time FSIs face growing pressure to not merely cut cost, but to reinvent their operations.

The retail loan securitization funding model is broken, and resulted in the lowest consumer loan origination and securitization volumes in North America in 10 years. Although credit card and automobile loan securitization markets are functioning, residential mortgage markets in the US are stagnant because the securitization market remains in crisis. Conversely, European Union new loan origination volume has declined only slightly from its 2007 peak.

FSIs will aggressively increase expectations from their BPO service providers for more services at lower cost. The pressures created by these expectations will improve the efficacy of outsourcing as innovation and technology are applied to BPO services. However, the realistic rate and level of process improvement and service expansion may be accelerated by expectations from FSIs and limited by the ability of vendors to deliver. It is at this point that both sides of the outsourcing arrangement will benefit from a more open, transparent, and collaborative approach.

The commercial cards business has recovered from the 2008-2009 dip in travel expenditures in North America and Europe, caused by the global financial crisis (GFC). Global volumes continue to rise but are driven by varying dynamics based on regional economic growth, market maturity and to some extent government driven priorities. This TowerGroup Research Note reviews the current market in each of these regions, and projects spending volumes forward through 2014. For purposes of this Note, TowerGroup defines commercial cards as commercial credit cards, as opposed to prepaid or debit cards, which are covered in separate Research Notes.

The rationalization of products, services, and markets is underway across the banking industry. As large banks seek new ways to improve revenue, manage costs, and target distinct markets, small banks will find new opportunities to grow through acquisition of customers dissatisfied with large bank fees and charges, especially smaller accounts, who are seeking low cost or fee-less basic banking services. Making money on the new wave of smaller accounts will be highly dependent on the ability of small banks to leverage technology. This will open the door for IT vendors to provide leading edge consumer-facing channel and service technologies.

This TowerGroup Research Note focuses on optimal offer decisioning in debt collections. Coverage includes a discussion of making an optimal offer in the context of the full collections life cycle. A description of the technology and necessary data elements are listed along with guidelines to assess organizational readiness. Leading vendors and their solutions in the space are provided along with indications of future directions of the technology.

Although SEPA has unified the European market in significant ways by creating a single market for payment systems users and allowing them to choose a payment services provider from another country, the payment markets that make up Europe are far from homogeneous. Countries in Europe show strong preferences for certain payment types over others. This report examines these trends, how banks in the European market are responding to them and provides guidance to technology providers interested in selling into Europe.