Ownership

One of the most important decisions a bank needs to make about their EFT switch system is probably whether to find a hosting service or acquire a switch and host themselves in-house. There are a lot of factors that come into play when considering this decision, which is by no means an easy one.

Generally speaking, the decision to use a hosting service always translates to relinquishing some control to the hosting provider. Depending upon the size and focus of the bank, this is not necessarily a bad option. The hosting provider can protect the bank from a lot of the complexities involved in running a switch.

Most of the time though, large banks opt for an in-house switch that they control and operate themselves because they perceive (and rightly so) that:

1. They can have more flexibility in terms of the functionality they offer to their cardholders.
2. They can respond to market drivers faster and deliver products quicker.
3. They can differentiate themselves from other banks (which is really a manifestation of the first two points).

The choice to in-source the EFT switch does have a price. The bank has to take ownership of the system. This translates differently to different people but the core point is this: the switch becomes one of the bank's internal, most important systems. All the processes that take place before the system goes live and during its lifetime must be internally owned and driven by the bank. Certification with global and regional networks? Implementation of new functionality and products? Testing of patches and upgrades? Regression testing? Unit testing? Integration testing? Trend monitoring and alerting? Pro-active monitoring of fraud indicators? 

All the above become the bank's responsibility. Departments need to be staffed with resources that have considerable EFT experience in order to take on tasks such as these for the duration of the system's lifetime. Where does the vendor come into play in this scheme of things? It's doubtless very important to choose a vendor with solid support skills, a pro-active approach to business drivers and a general outlook towards the EFT landscape. Ideally the switch vendor will act more as a business partner and consultant than a simple provider of software licenses. A vendor may also provide resources to perform certain technical tasks on behalf of the bank.

But the one thing that a vendor cannot achieve is own the process of setting up and running an in-house switch on behalf of the bank. One might say that this needn't be so: just get resources from the vendor to perform tasks the bank ought to do and be done with it. Well, that could work...but then again that is what hosting providers do. And they do it more efficiently and also a lot cheaper I would dare say. If the intent is to be more flexible and innovative, the bank should have their own people that live and breathe the product they've chosen. Getting immersed within the switch system is the one thing that cannot be outsourced if the switch system is in-sourced.