The Strategic Impact of Information Systems on Payment and E-Money Institutions
Hello. As you may know from our previous articles, we are a team that has been developing information systems for various banking institutions in the field of financial technologies for about 15 years, and we share our experiences through various blog posts. In this article, we’ll discuss a crucial topic not only for payment and e-money institutions but now for all banking institutions.
Payment and e-money institutions are generally organizations without branches and physical operations. The institution’s services and products are entirely electronic. All functions of the institution exist within an information system. In this article, we will try to explain what kind of strategic effects an information system has on the growth of a payment or e-money institution.
Cost
A good information system provides the best possible performance with minimal infrastructure resources. This is because one of the fundamental costs of payment and e-money institutions is infrastructure cost. In a typical topology, the information system operates with dozens of servers and data center services. Every transaction (payment, transfer, etc.) has a cost. We can call this the “per-transaction information system cost.” This cost is very important for institutions that already operate with very low profit margins. Poor technology selection by a payment institution can easily create an expense that consumes half of its revenue.
The information system of payment and e-money institutions must be developed with correct architecture and modern engineering. Otherwise, it creates dozens of unnecessary infrastructure expenses. Our experience in this field unfortunately shows that many payment and e-money institutions make these choices incorrectly at the beginning, forcing them to use many unnecessary additional software and purchase their licenses. Unfortunately, wrong architectural choice can also increase the required data center cost up to 10-15 times. For example, while there are much more modern open-source server operating systems available, many payment institutions pay hundreds of thousands of liras for expensive and inefficient operating system licenses.
Competitive Power
Yes, you read that right. “Competition.” Payment and e-money institutions offer almost the same products and services. Only their infrastructure differs. Their competitive power is strongly tied to the capabilities of this infrastructure, namely their information systems. Payment and e-money institutions compete for the same customer segment, and in this race, after commission rates, their main competitive areas are integration ease, system speed, technical support, and the modernity of mobile/web applications – topics directly related to infrastructure and information systems.
As the Eticsoft team, we work on various technical issues with 14 of the payment institutions operating in our country, and the most common questions merchants ask us when choosing a payment institution are about infrastructure and system capabilities.
Sustainability
It is extremely difficult to modernize a banking system developed with the most popular coding language from 30 years ago. This is because it’s almost impossible to find IT engineers (developers, etc.) who know the obsolete technology and want to work in this “useless” field. Additionally, modernizing a working system takes much longer than developing a modern system from scratch. Procuring infrastructure (like servers) suitable for old technology also becomes increasingly difficult. Banking institutions may find themselves having to choose between temporarily suspending their products and services or forcing the old system to work and postponing the crisis. Unfortunately, just as there are many banks stuck in this dilemma today, payment and e-money institutions are also facing this crisis.
It’s not an exaggeration to say that for payment and e-money institutions, sustainability and information system sustainability are equivalent concepts. This is because the entire institution operates with the codes within the information system. If the information system isn’t sustainable, the institution cannot be sustainable. Therefore, a modern technology choice needs to be made and it needs to be open to developments.
Deciding on the right architecture and engineering is not an easy process. Experts in classical IT fields often don’t make the right decision in this matter. The experience of an IT team that has directly completed projects in this field is necessary. An important point to emphasize: Since both IT technologies and fintech are rapidly changing innovative fields, even if a successful architecture is found, it cannot be implemented successfully and cost-effectively for long. For example, we as the Eticsoft team modernize our architecture in almost every project. On the other hand, it’s possible to encounter banking IT products developed 20 years ago in payment technologies that are, so to speak, struggling to survive. The reason for this situation could be another blog topic.
That’s all we can fit into this article about choosing the right architecture and engineering. If you need more detailed consulting, you can reach us without hesitation through the contact tab.