Payment Processing Transformation: How to Support Customer Facing Innovations and Adapt to Increasing Regulatory demands – PART 2

This article is in two parts.  Part 1 focused on the needs and challenges surrounding payment processing transformation, and provides advice on how to refresh your payments strategy, vision, and business case.  Part 2 discusses the best way to achieve the long-term vision: by breaking it into manageable short-cycle projects, each of which deliver value along the way.

  • Deborah Baxley, Global Cards Consulting Practice Leader, Capgemini
  • Jeroen Hölscher, Head – Global payments practice, Capgemini

Iterative design follows the creation of a long-term vision.  Once you have envisioned your long-term goals, it’s important to formulate a rational and incremental transformation strategy in which the strategy is executed via short-cycle projects that each deliver tangible value.  This allows the execution to be agile and flexible to accommodate market shifts.

This set of bite sized chunks include both cross-industry and internal components.  For example, the payments function could collaborate with partners to share delivery and thereby create bundles of value, embed payment processes into the daily life of customers, or optimize pricing for revenue vs. client retention.  Internally, the payments function could use message cloning for parallel processing resulting in scale readiness, source from best-in-class low-cost providers while managing aggregated workflow, minimize operational costs through configurable processing, align around common external and internal standards or generate insights through analytics engines.

This iterative design for performance and value added services typically comprises four themes: architecture refresh, platforms, value added services and reporting and analytics.  Once initiatives are laid out, they are prioritized according to “must have,” “complex but necessary,” “nice to have,” and “luxury.”  This prioritization arrays the initiatives across a series of plan phases in each of the four themes.

Transformation is not easy and we have a long history of failed projects to learn from.  We find three typical reasons for lower success or failures among large back-office transformation projects:

  1. Lack of alignment between technology, business and operating models – this alignment is crucial for success
  2. Technology lead project.  Transformation is not just a platform project.  This thinking leads to underestimating complexity and scope which must include agreements, billing, financial management, etc.  There is also the consideration of whether to adjust the software package to the environment, or visa versa
  3. Lack of focus on value proposition.  In this case the effort is focused on rolling out a platform vs delivering new products.  This misdirection is evident in the share of budget dedicated toward platform implementation vs value proposition roll-out

Firms need to reassess the basics of incremental transformation.  You should take an incremental transformational approach to deliver value for yourself and your customers.  This starts by building a transformation vision including maturity assessment for current vs. future state. A successful transformation requires end-to-end project management and execution to ensure that when faced with execution challenges, you do not deviate from the original plan and vision.  Include agile development concepts, such as short-cycle projects, during transformation. Each short-cycle project should comprise a mini business case, execution phase, and value delivery.

To summarize advice for successful payments processing transformation: revisit your payments strategy, go lean and agile, tune your spend mix between “Run the Bank” vs. “Change the Bank,” and assess the pay-off between cooperative vs. competitive investments.