In a recent American Banker (subscription required) article, Dan Wolfe asked “How Far Will In-House Shift Go at B of A?”

That’s in response to reports that this enormous bank will scale back its bill-payment relationship with CheckFree. It is a good question not just for this Charlotte-based megabank but for all the banks that are rethinking their businesses as they get bigger. Many are at least considering taking processing activities and some have already taken card processing within their walls.

There are some sound economic reasons for doing this. As banks get bigger, they get scale economies that allow them to do some things more efficiently than the specialist firms. Plus they see more ways to integrate differences functions across their increasingly vast empires.

But in doing so they are bucking the long-term trend in the payments industry which has seen more and more activities farmed out to specialist firms who know how to develop software and data processing technology and can benefit from enormous scale economies.

Many businesses have followed the bigger is better approach only to find that it leads to inefficiencies. At least part of Citicorp’s problems arise from being too big to manage. So don’t write off the CheckFree’s, TSYS’s, Global Payments, and other specialists that populate, and enrich, the payments ecosystem.