I got quite excited when saw this article and thought I was going to get a well articulated view from a Central Banker on the role of payments as a business.  Wrong!

Turns out, he thinks payments means to automate paper processes.  Huh … thats obviously important and his views on Check 21 and ACH are valid, certainly for the US market, where those rules apply.

Bank Systems & Technology : Pay It Forward

The financial services industry is slowly beginning to realize that the payments business, once relegated to the back office, instead should have a place front and center during strategic planning. By Patrick K. Barron, First Vice President and COO, Federal Reserve Bank of Atlanta

Also here

But the payments business is so much more.  Its all about the fact that banks no longer have a hold on customers balances through control of their (customers) access to their money.

Old world access:

• cheques
• debit card/credit card
• direct debit/ direct credit
• ABM machines

New world access (to name just 3):

• third party intermediaries, eg Paypal, Google, Dexit
• gift cards/ cash cards, eg Sears, Starbucks
• Online banking electronic transfer, e.g. Certapay, Interac online, Giropay, intrabank payment (Citi, Royal Bank of Canada)

The payments business is about understanding that a logical extension from disintermediation of funds access is disintermediation of the balances.  What happens when Starbucks decide to offer interest on their cash card …. hmmm .. maybe it will be easier to stick $500, or 1,000 on the coffee card.  Enjoy your latte and high interest simultaneously.  And that $500, or 1,000 comes from where …. the Banks’ balance sheets.  This is the risk banks face.