Click here to view the German version
At the end of 2024, Capco successfully completed a major transformation project for payment processing (ZV) in Europe. The project originated from the merger of two central banking institutions, which, until its completion, operated two separate payment processing routes for SEPA and SWIFT payments.
One route was managed in-house, while the other was outsourced as part of a Business Process Outsourcing (BPO) arrangement. The bank's objective was to migrate the entire payment business to the existing internal processing route and fully decommission the outsourced one.
This required the migration of hundreds of affiliated banks, their customers, and several thousand medium-sized and large corporate clients to the target platform. In addition, regulatory updates – such as the T2/MX migration and SEPA ISO 20022 format migration (Version 2019) – also had to be implemented as part of the project.
What prompted the shift?
Following the merger and harmonization of multiple IT systems, consolidating payment processing was the next logical step in unifying the central bank. The decision to adopt an in-house solution was also driven by the evolving regulatory adjustments. The goal was to establish a stable, future-proof payment processing route that leverages in-house operations to deliver efficient solutions for the bank, affiliated institutions, and their customers.
The Capco approach
Leveraging our deep expertise in delivering complex payment processing projects, we were involved from the outset of the project and played a key role throughout the project’s lifecycle.
Our main areas of involvement included:
- Gap analysis and target model design (April 2019 – June 2021). We conducted a comprehensive gap analysis assessment to identify differences between the existing and standard software to define necessary requirements. Details about the challenges faced with gap analysis and target model design are explored further in the second article of our Transformation in Payments series.
- Third-party management. Consolidating and unifying payment processing onto a central platform presented significant technological complexity and required extensive coordination across various external stakeholders. A major hurdle was aligning diverse expectations, technical requirements, and organizational structures – without compromising efficiency, regulatory compliance, or long-term strategic goals.
- Defining the migration approach. Migration projects in payment processing rely on selecting the right approach – whether it’s implementing a new system or migrating to an existing one, such as in a post-merger integration. The complexity of a payment migration depends significantly on the depth and volume of the bank's payment operations. Key considerations include functional requirements, payment processes, and balancing the priorities of various internal stakeholders (e.g. sales, risk, and operations).
- End-to-end (E2E) test management. Testing payment processes is a major challenge in platform migrations. These projects typically involve both internal and external complexities, including evolving regulatory requirements, increasingly complex standard software releases, and collaboration across internal and external partners (e.g., software providers and clearing partners). Critical success factors include hardware, test systems, systems and personnel availability, and the selection of suitable E2E test cases.
- Comprehensive communication strategy. Payment transformation takes place in a highly sensitive environment. As the backbone of banking, payment processing is subject to intense customer and regulatory scrutiny — any misstep can damage an institution's reputation. Despite ongoing standardization of payments, especially across the SEPA area, transformations often involve changes for customers and payment-processing staff. A well-planned communication strategy from the outset is essential to ensure alignment, manage expectations, and support project success.
- Operational readiness – systematic success. In a dynamic payment processing environment, the ability to successfully implement and operate projects is critical for the long-term success of a bank or payment service provider. Operational readiness plays a central role in this. Well-structured playbooks – covering all relevant steps of each change initiative – are essential. In addition, establishing a functional control center helps quickly manage potential production issues after they go-live.
Project outcomes & impact
The project achieved several key milestones, including five major payment migrations:
- EBICS- Migration
- Cross-border Payment/Large Value Payment Migration
- SEPA Payment Migration
- T2/MX Migration
- SEPA ISO 20022 Format Migration (Version 2019)
In addition, eight major project releases supported the expansion of the payment platform. Across the program, 97 go-live events were successfully executed. A total of 63 detailed project playbooks were developed – each containing up to 1,281 individual activities. More than 600 banks and thousands of corporate clients migrated from the decommissioned platform to the new target platform. After the successful migration, as of 2024, the target platform processes approximately 10 billion payment transactions annually.
We continue to share insights and best practices from this and other payment transformation projects through our article series, Transformation in Payments.