DZ Bank aims to dominate as a payment powerhouse
DZ Bank's self-developed payment platform, a result of five years of hard work and dedication from over 500 employees, has been successfully implemented. The platform, developed after the merger with WGZ Bank in 2016, was initially planned for migration in 2023 but was moved up to 2022 to better future-proof the system.
The development process was no easy feat, with the platform requiring substantial investment in technology, security, and compliance systems. This initial cost burden has impacted near-term profitability, but DZ Bank aims to monetize the platform and expand its role as a payment service provider, offering services like clearings or new functions like Request-to-Pay.
The migration process was meticulously planned, with steps for the transfer of functions like international payments (SWIFT), SEPA business, or card payments outlined in 12 steps over two years. Despite the challenges, DZ Bank successfully implemented the Instant-Payments Regulation, while three-quarters of European banks failed to meet the January 9 deadline.
The migration process was carried out in three steps without any noticeable impact on end-users. Most customers didn't notice the shift as they expect seamless payment processing. Banks and customers were prepared for the migration a year in advance, ensuring a smooth transition.
The long-term success and profitability of the platform rely heavily on its ability to sustain investment for continuous adaptation, achieve significant market penetration, and evolve its services to capture growth in digital payments. While the costly development process and regulatory complexity represent hurdles, success is possible through strategic innovation, partnership, and scalability, as this sector’s dynamics show ongoing growth potential albeit with margin and investment challenges.
Matthias Ehringer, responsible for payments and accounts at DZ Bank, spearheaded the project. Lukas Homrich, a freelance journalist and member of the dreimaldrei journalists' bureau, who writes about economic and financial topics, has been documenting the journey.
By the end of 2024, the migration of 670 banks and their customers was completed without major disruptions. The choice to bring payment processing in-house, rather than opting for the standard solution of outsourcing, has proven to be a strategic decision for DZ Bank, ensuring control and flexibility in the ever-evolving digital payments landscape.
The next few years will show whether the costly process was worth it. With the platform now in place, DZ Bank is well-positioned to navigate the changing landscape of digital payments, striving for long-term profitability and growth.
The strategic decision by DZ Bank to bring payment processing in-house, through the development of its own platform, has revealed a significant investment in technology and finance, critical in the business of digital payments. Moving forward, the bank aims to leverage the platform to expand its financial services, offering clearing and new functions like Request-to-Pay, while simultaneously aiming for growth and long-term profitability in the rapidly evolving digital payments sector.
