Busting Open the Transaction Silos

Hewlett Packard Co. thinks banks processing ATM, Web, branch, and other traffic in separate channels could benefit by switching all this volume through one common system. The company, which through its acquisition of Compaq Computer Corp. owns the Tandem unit whose computers drive so many payment data centers, is readying a product in its labs called “Open Bank” that it says will facilitate “multi-channel integration” and drive down overall transaction costs by 30% or more for banks. The savings could be particularly important for Internet transactions, says Tim Evans, worldwide director of payments for the financial industries business unit at HP. “The Web has created a huge volume of transactions, but they're not fee-earning,” he says. “It's a cost of convenience for the customer.” The Open Bank product comes as HP is campaigning to replace the installed base of older mainframes that in many cases have switched payment transactions for decades at banks and at transaction processors. Indeed, the company estimates that two-thirds of transactions on ATMs and at the point of sale run through its gear. HP argues the new payment switches, with their high uptime rates, could then be used to run other bank traffic and to launch new services, such as person-to-person payments. “Why not take my core payment switch and use that across other delivery channels?” asks Evans. The Open Bank software will allow banks and their branches to process transactions while accessing data compiled in previously inaccessible transaction channels, all in real time. An ATM user, for example, could be sent messages from the his bank regarding his mortgage while he's withdrawing funds, or could be authorized for a larger withdrawal based on assets he holds at the bank. “You have multiple silos (at banks),” says Evans. “And a lot of data has built up in those silos.” HP has only begun talking to potential customers for Open Bank. These include big banks, but also processors serving community banks. Retail chains, too, could be targeted for the product, Evans says. The cost of Open Bank will depend on the complexity of the customer's operations, including how many branches, accounts, and ATMs it owns, but will run from hundreds of thousands into millions of dollars with implementation.