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Throughout its life, the manufacturing industry has gone through many changes that have each revolutionized the way products are made. Consider the principle of using uniform and interchangeable parts, rather than every element being unique. By being able to easily replace and reuse parts, manufacturers could make their processes more efficient, with less waste and faster time to market. And then Henry Ford’s advocacy and widespread use of the assembly line made mass production a reality; slashed the time needed to make a Model T Ford; and significantly cut the cost to the customer.
Looking at the payments industry, it is clear how these two theories can also be applied to software development, and have the potential to deliver notable benefits. The electronic payment systems in use in many banks today often ignore customers’ needs; are too complex and difficult to deploy, configure and use; and do not support basic economic principles such as transparency and liquidity. The process of developing and managing payment systems at a bank resembles an old fashioned automobile factory: handmade by artisans and customized for each individual customer.
If the payment industry was to learn from manufacturing and adopt uniform and interchangeable parts in its system development processes, financial institutions would find it much easier to migrate to newer systems and reduce unnecessary waste in developing, deploying, and operating redundant and overlapping systems. In manufacturing, success of interchangeable parts is based upon understanding precisely what a machine is intended to do and automating that process with a standard set of parts. To create re-usable parts we have to know what we are producing. In the case of payment solutions there is enough experience that a set of best practices can dictate the reusable business services that are required. The reusable parts must be service components that can be snapped together to create the end product.
The concept of mass production and the assembly line is based on automation, and establishing standard processes and measuring time to completion and cost of each step in the process is fundamental. This is a lesson that must be learned by payment system vendors, who often have not measured the time to completion and cost required to automate payment services in the past, and therefore haven’t always focused on reducing the time to completion and the cost of implementation and operation.
As you can probably tell, this is a topic I am passionate about and in my next blog post, I will continue to look at some of the changes that the manufacturing industry has gone through, and how they can be applied to the payments industry.
This content is provided by an external author without editing by Finextra. It expresses the views and opinions of the author.
Ivan Aleksandrov CSO | Core banking, BaaS, Fintech Advisory at Advapay
18 February
Scott Dawson CEO at DECTA
Kristine Jakovleva Chief Marketing Officer at Advapay
17 February
Taras Boyko Founder at BTG Corporate Services Provider
14 February
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