Payment Hubs Market Landscape: Volante Technologies/VolPay Hub

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1 Payment Hubs Market Landscape: Volante Technologies/VolPay Hub Reduced implementation time using standardized library of functions and automatic code generation Publication Date: 21 Dec 2016 Product code: IT David Bannister

2 Summary Catalyst The global payments industry faces enormous changes in the next few years, with the prospect of real-time cross-border payments and new payment service providers adding to the flow. Given the length of time that the concept of a payments hub has been in the market, it is hardly a surprise that some vendor systems are showing their age. Nearly all established vendors are in the course of redeveloping their products for the modern payments world, but this will take time and creates an opportunity for newer competitors to emerge or for companies that have established their bona fides in adjacent markets to move in with expertise and more modern systems. Key messages Modern payment types and messaging standards are not well handled by existing payment hubs or other architectures, and a new generation of orchestration platforms are emerging. As hubs evolve to take an orchestration role, flexibility will be required. Rules-driven software configuration can substantially reduce the development time required to add new payment types and workflow changes. Ovum view Volante is in a strong position to capitalize on the need to have real-time capability in systems that are easy to configure as new payment types are introduced and workflows adapt to them. It has a strong reputation in its existing business and a customer base that includes tier-1 financial institutions, the largest US stock exchange, and corporates. Its customers include Nedbank in South Africa, which is implementing a VolPay solution across several branches as part of a project to comply with changes to South African banking regulations. Moreover, over its 15-year history, Volante has also forged partnerships with large-scale ERP vendors Oracle and SAP, as well as with BT and a range of systems integrators internationally. The company has until recently taken a background role, however, bringing its specialist integration expertise to bear on projects that have often involved systems from better-known vendors. Until recently, it could be seen as hiding its light under a bushel; despite having nearly 200 employees in six international offices, the company could suffer from a perception that it is a small, niche player, which is becoming a problem for smaller vendors as institutions take supplier risk more seriously. Recommendations for enterprises Why put VolPay Hub on your radar? The major claim for the product is drastically reduced implementation time. The company's view is that integration issues are by far the most time-consuming and costly aspects of a payments hub implementation. By using a standardized library of plug-ins and data transformation functions, it aims to reduce implementation from "months to weeks." Ovum. All rights reserved. Unauthorized reproduction prohibited. Page 2

3 The rules-based configuration engine automatically generates documented code using a streamlined, "wizard-style" guided process designed to be used by business analysts rather than coders to systematically define customer preferences, business rules, and exception management process flows. The Volante offering would be worth considering for larger institutions grappling with the integration of multiple existing systems in order to streamline their infrastructure, or those that have a requirement to integrate newer payment types, such as immediate payments. It will also be of interest to smaller institutions considering a payment hub implementation or replacement. Market landscape The concept of payment hubs has been around since at least the turn of the century, but everyone has their own concept, and the industry is no closer to a definition of what constitutes a payments "hub." Yet as the global payments industry comes to terms with the prospect of real-time cross-border payments, and with new PSPs adding to the flow, the idea of having a central system that takes incoming payment instructions from a variety of sources, in a variety of formats, and processes and executes them before sending them on to the appropriate destination automatically is increasingly appealing. Increased automation can only reduce costs and increase straight-through-processing rates. Given the length of time that the concept has been in the market, it is hardly a surprise that some vendor systems are showing their age, having largely been developed before even the UK's Faster Payments Service which is itself about to undergo a refurbishment as it approaches the end of its first decade in operation. Nearly all established vendors are in the course of redeveloping their products for the modern payments world, but this will take time and creates an opportunity for newer competitors to emerge or for companies that have established their bona fides in adjacent markets to move in with expertise and more modern systems. The role of the hub has also changed over the years, and while there is still no real agreement on what functionality should be included in the definition of a hub, there is increasing consensus that its role is to orchestrate the accurate flow of multiple payment types from multiple sources to multiple destinations in as automated a process as possible. The wholesale banking and payment sectors of the industry are positioning themselves to improve customer offerings and modernize their systems in 2017 as they expand their IT budgets to invest in upgrades to their capabilities, products, and services: 68% of corporate banks plan to increase their IT spend across all projects in 2017 according to Ovum's ICT Enterprise Insights 2016/17 data. More specifically, the data shows that payments architecture and payment hub projects are a topthree IT priority for 25% of corporate banks internationally (Figure 1). Ovum. All rights reserved. Unauthorized reproduction prohibited. Page 3

4 Figure 1: Payment architectures are high on the IT agenda for banks in 2017 Source: Ovum ICT Enterprise Insights 2016/17 Highlights Company background Volante was founded in 2001 in Silicon Valley by a trio of messaging specialists who had formerly worked together and separately at Oracle and other start-up middleware companies. It remains a privately held company. They formed Volante to specialize in the automation and integration of financial messages and market data in capital markets trading rooms and back-offices, largely focusing on the Financial Information exchange (FIX) protocol and Financial products Markup Language (FpML). In order to be closer to its customers, the company moved to New York soon after, and now has offices in London, Dubai, Mexico City, Chennai, and Hyderabad. Since then, the company has developed a strong reputation for its expertise in the wider financial messaging and standards fields, including ISO 20022, Swift messages, and other payments-related formats. Its initial development and for most of its history its only product is the Volante Designer software development tool, centered on a growing and maintained library of 85+ standards, plus some 250 bidirectional and customizable mappings to and from the various messaging standards and ISO which is the internal data model of all modules in the suite including Swift MT, FedWire, BACS, SAP, CGI-MP, and CHIPS. As its business in the payments area continued to grow, the company decided to productize this internal knowledge taking the view that the library had by that time captured most of the likely Ovum. All rights reserved. Unauthorized reproduction prohibited. Page 4

5 configuration options and could be used to automate the configuration and integration of payment systems. This led to the launch of the VolPay Suite in 2015, which now comprises three software products: VolPay Foundation, for integration of payment data and payments applications development; VolPay Channel, an onboarding and payment format mapping system; and VolPay Hub, a software-based configurable payments processing and orchestration application. Technology assessment Volante describes the VolPay Hub application as a "centralizing payments orchestration engine" that allows the processing of any payment type from any channel. Although designed to work with the other components in the VolPay Suite, it can also be deployed in a mixed environment, integrating with existing system implementations. As with the other elements in the VolPay Suite, VolPay Hub is based on a streamlined, "wizard-style" guided process designed to be used by business analysts rather than coders. An "orchestration configuration process" allows analysts to systematically define customer preferences, business rules, and exception management process flows and generate documented executable code. As Figure 2 shows, Volante has chosen to divide the functions of the system into four types capturing payment flows, analyzing and executing them before performing whatever transformations are needed to deliver them out to communications gateways. Capture functions include transformation, enrichment, validation, and de-duping before analysis and the application of attributes specific to that payment country-specific rules and payments methods, for instance. Many of these functions take data from external sources, and VolPay Hub has adaptors for the most common enrichment and validation services and can relatively quickly create adaptors for less common services, if required, through the architecture of the integration technology. Ovum. All rights reserved. Unauthorized reproduction prohibited. Page 5

6 Figure 2: VolPay Hub functional diagram Source: Volante Technologies The platform-agnostic system can be deployed in a cloud-hosted ASP or software-as-a-service (SaaS) model or as a standalone application. It is designed to be configured by customers' staff following the initial deployment, which would typically be done by Volante teams working with the client or in partnership with an integrator. As well as working with Oracle and SAP, the company has formed local partnerships in geographies where it does not have a direct presence, and in South Africa, where it works with Bytes Technology Group, which recently implemented a VolPay system at various Nedbank locations. More recently (April 2016), Volante partnered with Istanbul-based company Payfessional for the marketing and support of the VolPay suite in Turkey and the surrounding region. Volante's maxim is "configuration not coding" to allow clients to develop and manage the software themselves. Manual involvement from Volante is typically low with regard to consultancy services; although it does offer these, it does not depend on consulting revenue. It is focused on developing software IP and enabling clients to "take charge of their own destiny," by empowering them to make their own changes rather than having to depend on consulting services every time they want to make a change. The application also features a browser-based payment hub management console (Figure 3) with comprehensive search, audit trail, and reporting functions on all payment processing activities. This can be configured to automatically generate reports according to user-defined parameters. Another feature of the software is that all related documentation is automatically generated along with the code, rather than being a post-implementation afterthought. Automatic documentation is also useful for creating sign-off documents in onboarding situations. It also includes an in-built testing Ovum. All rights reserved. Unauthorized reproduction prohibited. Page 6

7 harness, which means that once the configurations are complete, users can immediately test whether or not the application is working correctly. Figure 3: Automatic report generation for payment management in the VolPay suite Source: Volante Technologies Technical details Payment standards supported include the following: ISO 20022/Swift MX, SEPA, SADC, CGI-MP, local variants for real-time payments and ACHs Swift MT series, CHIPS, CHAPS, TARGET2, SRG ISO 8583: 1987, 1993, 2003, Amex, Mastercard, Visa, Faster Payments switches Corporate: EDIFACT, X12, BAI2, SAP IDocs, PEXR Domestic proprietary: US, UK, Japan, Australia, Singapore, Indonesia, Canada, Brazil, Colombia, Mexico, Denmark, the Netherlands, Poland, and South Africa Alternative payments: Ripple Platforms The software is platform agnostic: code generated by the configuration engine is native Java, allowing it to run in any Java Virtual Machine (JVM) environment. The hub can be implemented across a range of established technology stacks for the required database, application server, service bus, and operating system, including open source options such as JBOSS, Linux, MySQL, Mulesoft, and Camel. Market impact Currently, Volante has some 80 customers in 26 countries, including a broad range of large financial institutions such as major stock exchanges and one of the largest card processors, as well as banks Ovum. All rights reserved. Unauthorized reproduction prohibited. Page 7

8 and corporate enterprises. At the time of its launch in October 2015, the company said that it was working to implement VolPay Hub at two financial institutions one in Mexico and the other a tier-1 global US bank with international payment operations but declines to name them publicly. In terms of potential markets, the company has two target sets. The first is small to medium-sized organizations needing a payment hub solution where shorter implementation timeframes and lower costs of implementation and ongoing maintenance are key requirements, or where a new digital payments platform is being implemented. More ambitiously, it sees a role in larger organizations with existing systems that require support in making the transition to a new digital payments model, effectively acting as a bypass for new payment types and sources while the older system is modernized or, perhaps, replaced. Data sheet Key facts Table 1: Data sheet: Volante Technologies Product name VolPay Product classification Payment Hub Version number 1.0 Release date October 2015 Industries covered Financial Services Geographies covered International Relevant company sizes Tier 1 5 financial institutions/corporates Licensing options Generally on-premise, but cloud/asp/saas deployments are available. Licensing options depend on client requirements. URL Routes to market Direct and via partners Company headquarters Jersey City, New Jersey, US Number of employees 190+ Source: Ovum Appendix Author David Bannister, Principal Consultant, Financial Services Technology david.bannister@ovum.com Ovum Consulting We hope that this analysis will help you make informed and imaginative business decisions. If you have further requirements, Ovum s consulting team may be able to help you. For more information about Ovum s consulting capabilities, please contact us directly at consulting@ovum.com. Ovum. All rights reserved. Unauthorized reproduction prohibited. Page 8

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