To win new corporate clients and grow market share, Scotiabank’s Global Transaction Banking Payments & Products division aimed to process larger payment volumes rapidly, securely and cost-effectively.

Scotiabank embraced a consolidated payment transaction processing hub model, and used an agile methodology to aggregate all payment types using a centralized, highly automated payments hub.

For commercial banks, winning large corporate clients represents a valuable opportunity for business growth. With major changes such as real-time payments set to shake up the B2B banking space, Scotiabank wanted to distinguish its payments offering by delivering innovative services ahead of its competitors.

Rob Matys, Director, Global Transaction Banking Technology at Scotiabank, explains: “Growing and retaining our client base are both important goals for our business. Large multinational organizations need to process thousands of payments equating to millions of dollars at a time, and if we can service these accounts more effectively than our competitors, we can increase our volumes—and our reputation—substantially.”

Moving towards a centralized payment hub offers a 360-degree view of all payment pre-processing, and creates the headroom needed to support explosive growth in transaction volumes. Inspired by a McKinsey whitepaper on the subject, Scotiabank embarked on a journey to what McKinsey considers the most ambitious payment model: The Consolidated Payment Transaction Processing Hub.

Rob Matys says: “The legacy payment processing landscape at Scotiabank was fragmented, with multiple endpoints for each payment type. There were many challenges with this design as it was limited from both a capacity and a scalability perspective. To meet our objectives, we required a platform that could support all payment types, which infers being able to transform and orchestrate messages, and efficiently manage the processing of large transaction volumes.”

Scotiabank selected IBM® Financial Transaction Manager (FTM) as the heart of its new centralized payments processing hub. The Scotiabank Payment Centre represents each payment type as business logic running on the FTM platform. When a transaction arrives, a mapping layer transforms the message into a single, canonical format, identifies the target payment settlement system, and then transforms the message to the target format of the downstream system. All of the bank’s major payment flows are now aggregated on the central platform, and Scotiabank is in the process of decommissioning the legacy payment systems and aggregating volumes on the single platform.

Scotiabank executed the first phase of the payments modernization program using the traditional waterfall methodology between 2012 and 2016. While successful, the business perceived the method as a slow and serial approach that was not meeting the time-to-market expectations. To truly leverage the power of the modern technology platform, Scotiabank recalibrated the project methodology and launched an innovative new program: Agile for Payments. The bank established multiple payment-focused labs, focused on enhancing payments services and modernizing the end-to-end payment processing ecosystem.

Scotiabank, partnering with Toronto-based boutique firm Agile by Design Inc., set out to achieve business agility specifically designed for the payments space, via a design-driven approach to organizational change. With an agile methodology for the Scotiabank payments domain, the bank was able to align the technology landscape, organizational structure and business objectives to maximize productivity ratios. The bank customized and employed agile best practices to realize rapid delivery and feedback of payment features.

FTM has several turnkey features that support the Agile for Payments development approach, including payment level prioritization, which enables the business to guarantee that high value and/or priority payments are processed ahead of others. FTM also has a granular deployment model that supports the iterative agile software development pattern, which helped the bank increase the number of production releases per year. More frequent release cycles helped Scotiabank to expedite the delivery of new payment features to end clients, and mitigate deployment-related risks.

FTM has a modular, object-oriented application architecture and design, and standard operations such as payment bulking and de-bulking are shared across all payment processing. This approach eliminates duplication during the development process, aiding the expedited time to market mandate.

“By combining the modern, flexible technology stack of the FTM platform with agile development best practices, we can accommodate the complexities of payment processing without sacrificing time to market or end product quality,” says Greg Lahn, VP, Global Transaction Banking Technology. “Our agile approach helps us evolve our platform, at the same time delivering business-driven priorities such as new payment services to clients.”

Agile is often associated with low-risk projects, and embracing the approach for business banking payments was considered by some as an aggressive move. However, by combining industry-leading technology with a problem-solving, solution-oriented team, Scotiabank’s Agile for Payments program has proven itself to be a highly effective route to transformation.

One example of time to market for a new payment service is the bulk email money transfer product, based on the Interac e-Transfer service.

Enterprises such as insurance companies often need to make large-volume one-off payments, which has traditionally meant mailing out checks. The Interac e-Transfer service eliminates this complexity by enabling businesses to issue payments using only the payees’ names, account numbers and email addresses—vastly reducing the cost and manual work involved in issuing physical checks. Leveraging the Agile for Payments methodology, Scotiabank’s Global Transaction Banking (GTB) Payment Products Team was able to quickly reprioritize the development backlog and roll out the bulk email money transfer offering within just 10 weeks elapsed time, enabling Scotiabank to be first to market.

In another case, Scotiabank needed to act fast to help bring an innovative pre-paid Visa card to market.

“Remote communities in Canada are very isolated, living far away from major population centers and bank branches,” explains Michel Cardinal, Director, Global Commercial Card at Scotiabank. “The Government of Canada wanted to avoid inconveniencing people who had to travel significant distances to cash and deposit a physical check. Many communities rely on The North West Company [NWC] for their food, clothing and hardware, as well as for financial services—and the company’s WE Financial Visa Prepaid card is a popular choice for people who cannot easily get to traditional bank branches.

“Working together with NWC, the Canadian government in Ottawa, and Visa, we rapidly developed a fast, seamless and secure payment solution that deposits government disbursements directly to the WE Financial Visa Prepaid card—enabling remote communities to get instant access to funds rather than driving many miles to cash a check.”

Scotiabank was working on a major GTB initiative to offer clients the flexibility and transparency to recall, reverse, and trace payments. Midway through the initiative, the business stakeholders confirmed that the priorities had changed due to client demands and market conditions. Had this been part of a traditional delivery methodology, the work would have been shelved and no business value would have been realized.

However, because the team had embraced the agile work decomposition methodology, Scotiabank was able to re-prioritize the backlog while delivering the business value already developed to production (i.e., work not wasted). This resulted in a net re-allocation of 50 percent of originally approved project funding to other high-value work packages. The completed package was successfully deployed to production and the team’s capacity immediately shifted to the new priority work backlog. The “work decomposition” methodology, combined with FTM’s incremental deployment features, were key enablers in the success of the project.

An increasing number of corporate clients consider Scotiabank’s Integrated Payments Service Offering a competitive advantage, and the bank began to see its payment processing volumes increasing substantially as a result. The projected increase in volumes mandated an upgrade to the latest version of FTM, with core infrastructure scaled to meet the increased demand.

The aim was to create a detailed, visible, and risk-prioritized backlog in a way that ensured thorough end-to-end validation of payment flows with higher business value and/or risk. If the bank had chosen a traditional methodology for testing and delivery, its teams would have had to execute the work in silos. Working against a largely abstract backlog of use cases without shared understanding of the context and validation would have increased the risk of defects substantially. Instead, the bank used a testing process that emulated actual production traffic, which was key in flushing out subtle discrepancies between test and production client configurations.

Leveraging the Agile for Payments methodology and partnering with IBM Global Business Services®, the bank was able to significantly de-risk the delivery. The entire FTM platform, which contains more than 50 payment specification transformation maps and workflows for 13 payment types, culminated in over 600 test case scenarios. The platform was successfully upgraded with only one minor production defect, resolved within just one hour.

To build on the transparency, flexibility, and straightforward manageability that the FTM platform offers, Scotiabank is planning to enable end-to-end transparency across the entire payment lifecycle.

Scotiabank transfers the majority of payments, from a volume perspective, via system-to-system file transfers. The need to track and trace payment files, and the corresponding acknowledgement responses, from file receipt to payment settlement and back, mandates a solution that aggregates the end-to-end lifecycle in a single, consolidated and real-time view. This is the goal of the next phase of Scotiabank’s payment modernization program, and deploying IBM Sterling File Transfer Service with IBM Control Center will position the bank to deliver these capabilities.

Greg Lahn concludes: “Choosing the best technology is just the first step to achieving a goal. Building a well-structured team and optimizing your project methodology are both essential to leverage the technology and realize tangible business benefits.”

Founded in 1832 and headquartered in Toronto, Ontario, Scotiabank is Canada’s international bank and a leading financial services provider in North America, Latin America, the Caribbean and Central America, and Asia-Pacific. Employing more than 88,000 people, the bank serves 23 million customers worldwide and managed assets of CAD856 billion in 2015.