Modernising payment technology can have a profound impact on an organisation's operations. It often leads to complex transitional operating models, particularly when dealing with dual-running payment systems during transitionary periods. It can require a significant shift in organisational mindset and process execution, especially if you're moving towards Payment-as-a-Service (PaaS) model, where payment services are being outsourced to a third party.

Preparing your organisation effectively for this change is critical to enabling payment platform modernisation success. Not doing so can lead to customer and colleague disruption, and create significant organisational operational and reputational risk. While the extent of organisational change will vary depending on the chosen modernisation strategy, what remains consistent is the need for investment and an operating model change delivery mindset to minimise such impact. Drawing from our experience, here are important operating model factors to consider when undertaking this type of transformation.

Limit current state design analysis, and focus on the end-to-end target design impact

One common misstep in an end-to-end operating model delivery is spending excessive time dissecting the current state. To stay efficient, it's crucial to keep the current state impact assessment streamlined and well-structured, focusing instead on the new end-to-end payment solution design:

  • Identify key functions: Begin by pinpointing the essential functions that underpin payment processing end-to-end. Keep the analysis of each function’s role in supporting payment journeys light touch, focusing on people and processes, and prioritise developing a strong business engagement model.
  • Narrow the impact focus: Collaborate closely with the architecture solution design to identify areas where new payment processes or capabilities are required and understand how these elements will operate and integrate into the existing organisational framework.
  • Focus on the new: Avoid burdening the new payments operating model with existing operational inefficiencies, and recognise where it can help resolve existing audit actions. This transformation is an opportunity to reduce legacy processing and enhance payment processing efficiency.

Build confidence in the organisation’s new IT support model

The level of impact on your IT organisation will vary depending on the payment modernisation journey you embark on, and the type of payments model you select. Building confidence in the new end-to-end IT support model is critical and requires the active involvement of your IT teams during process design and testing.

  • Define the end-to-end IT support model early: Focus on defining the systems, teams, and functions that underpin supporting your payments journey. Consider what model will best support your new payments platform when operationally live (e.g. DevOps engineering v traditional ‘change and run’) and ensure the team have the correct skills to operationally support a payment platform, supported by ongoing training and knowledge transfer activities. Ensure there is strong leadership accountability and reporting lines within this framework.
  • Focus on critical IT support model interactions: Once the end-to-end support model is defined, concentrate on the critical interactions, processes, and roles and responsibilities that span different teams. Design IT support processes by bringing teams together where hand-offs exist in the model. For example, if your payments solution is built on cloud infrastructure, establish clear cloud consumer models, processes, and responsibility guidelines. If you've outsourced payments processing, ensure the interaction between your organisation and the third-party operations team is understood, so that IT service processes (e.g. incident management) seamlessly integrate and operate effectively.
  • Test with the IT operational team to build confidence: Involve IT support teams in activities like failure testing and IT disaster recovery testing, where you can rigorously test processes like incident management and payment reconciliations, and increase ‘hands on’ exposure to the platform. Consider building confidence with a "live proving" phase where testing occurs in the production environment.

Create a regulatory assurance plan, supported by robust governance 

Regulatory scrutiny is a common feature in payments transformation journeys so make sure you establish regulatory confidence through early and structured engagement. Engaging internal risk teams, coupled with robust governance, helps to set the transformation off on a positive journey.

  • Create a robust regulatory engagement plan: A consistent, clear and organised regulatory engagement brings the regulator and payment schemes on your transformation journey and builds confidence in the delivery, allowing them to support and approve the transition to the new platform.
  • Understand requirements for third parties: If you select a model that outsources payment processing, or any underlying payment technology to a third party, a material outsource (SS2/21) will be required. Establish the design that enables the continuation of service, in the event of a supplier failure and a stressed exit is required, taking this through governance and conducting the appropriate level of testing to assure operational resilience is built into the operating model.
  • Engage your risk function early: Build confidence with project sponsors and executives by having your internal risk function engaged on the transformation journey, supporting with delivery assurance.
  • Establish senior level governance support: Implementing the right governance structure is critical to enable you to move efficiently, make quick decisions, and obtain the necessary organisational governance approvals through implementation transition states.

Be clear on transition states and focus on how to embed the change 

When setting up a new payment platform, you inevitably encounter complexity during the transitional phase, because old and new payments platforms co-exist. Understanding these transition phases is critical for maintaining operational continuity of your payments services.

  • Define a transition plan: Ensuring business and IT operational teams understand the transition state plan, the impact to operational payment processing, and how this will evolve going forward will be critical to managing the organisation through the continued evolution of the payment operating model at the early stage.
  • Understand the dual payment platform model: Once the transition plan and the interdependencies between current and new payments platform is understood, work with business and IT operational teams to define how critical payment processes like reconciliations will operate in a dual payment platform environment.
  • Focus on embedding key processes: Successfully modernising payment architecture requires the effective integration and embedding of payment processing into an organisation's core operations. Reporting management information and KPIs on embedding progress as the operating model matures instils confidence and allows for repeated practice until these processes become part of the organisation’s DNA.

A successful operating model = a successful payment modernisation 

Getting the operating model right is essential to a successful payments modernisation journey. It is crucial for leadership to understand the importance of getting this right from the start, and committing investment into operating model workstreams early will help to land the change in a safe, secure way that protects customers and minimises organisational disruption.

If you recognise some of these challenges and would like to know more about our expertise in this area and how we could help, please reach out.

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