DZ Bank aims to establish itself as a dominant force in the payment industry.
In a strategic move aimed at maintaining control over technological innovation, resilience, and cost-effectiveness in payments infrastructure, DZ Bank, a central institution for cooperative banks in Germany, has completed the build and migration to its own payment platform. The decision to develop the platform in-house was made in 2018 by DZ Bank's board, and the migration process took around 500 employees, five years, and over 100,000 workdays.
The migration occurred in three steps without end-users noticing, ensuring a seamless transition for the bank's customers. By the end of 2024, the migration of 670 banks and their customers was completed without major disruptions.
Matthias Ehringer, head of payments and accounts at DZ Bank, spearheaded the project, with Jan Stüve, IT strategist at Capco, providing valuable advice on the payment platform build. The team developed a standardized target image of the platform, ensuring it would meet the specific demands of DZ Bank's financial ecosystem.
Key factors influencing this decision included balancing cost and resilience, seamless integration, innovation and customization, strategic control and risk management, and a focus on technology leadership within the cooperative banking context.
Digital payment systems require high reliability and scalability while keeping costs manageable. An in-house system allows DZ Bank to tailor their architecture more finely for these objectives rather than relying on external providers with generic platforms that might not fit perfectly.
As a large central institution, DZ Bank must integrate deeply with existing banking and payment infrastructures. Building internally facilitates better compatibility and interoperability within their unique banking group and legacy systems.
Continuing investment in R&D is critical in the fast-evolving paytech landscape. By developing its own platform, DZ Bank can implement novel architectures with specific features like offline payments support, privacy, and security tailored to their operational needs.
Strategic control and risk management are essential for DZ Bank. Building in-house platforms enables them to mitigate risks such as double spending, financial integrity risks, and compliance with regulatory requirements more closely aligned with their governance and risk frameworks.
Given that many external paytech vendors face challenges scaling and sustaining innovation, DZ Bank’s approach to developing internal capabilities reflects a strategic priority to maintain competitiveness and control over their payment processing technologies.
With the new platform in place, DZ Bank plans to offer services like clearings or new functions like Request-to-Pay. The bank is strategically well-positioned, as shown by the timely implementation of the Instant-Payments regulation. Other banks closely watched the progress of DZ Bank's project, according to Ehringer.
Moreover, DZ Bank intends to monetize its new platform and appear more frequently on the market as a payment service provider. The existing WGZ Bank payment platform was transformed, built up, and prepared for migration. The projected number of SEPA transactions increased from 7.5 to 10 billion per year between 2018 and the start of the platform.
Regulatory changes such as the introduction of European payment systems T2/T2S, the unified European data exchange (ISO 20022), and changes to SEPA standards had to be integrated into the project. The migration process included functions like international payments (SWIFT), SEPA business, or card payments.
Most customers were unaware of the changes, as they expect seamless payment processing. The development and migration process took around 500 employees, five years, and over 100,000 workdays, demonstrating DZ Bank's commitment to delivering a robust and reliable payment platform for its customers.
The strategic decision made by DZ Bank's board in 2018 involved the development of an in-house payment platform, which aimed to establish control over technological innovation, financing, and cost-effectiveness in the banking sector, and to facilitate seamless integration and innovation.
With the completion of the migration to their own payment platform, DZ Bank is now able to implement novel architectures and features tailored to their operational needs, ensuring high reliability and scalability while maintaining control over strategic decisions and risk management in the fast-evolving paytech landscape.
