Business Capability Mapping for Payments Companies

1. Capability-Driven Transformation of Payments Operations www.capstera.com 1

2. Map Your Future, Master Your Present, Monetize Your Potential. Organizations face unprecedented challenges in the rapidly ▪ evolving payments ecosystem: fintech disruptors, shifting consumer expectations, open banking regulations, and technology innovations are reshaping competitive boundaries. Traditional operating models often struggle to adapt, with siloed departments, fragmented systems, and overlapping functions creating operational inefficiencies and hampering innovation. Business Capability Maps provide the critical foundation for ▪ navigating this complexity. By creating a comprehensive view of what your organization does—independent of how it does it—capability maps offer a stable reference point for strategic planning, technology rationalization, and operational optimization. For payment organizations seeking sustainable competitive advantage, capability-based transformation has become the cornerstone of business and technology alignment. www.capstera.com 2 2

3. Decoding the Capability Map Advantage 1 Business Capability Maps serve as the universal language that bridges business strategy and operational execution. For payment firms, they create a stable foundation for transformation by defining core business functions without being tied to current organizational structures, processes, or technologies. ▪ Strategic Alignment: A capability map creates direct line-of- sight between corporate strategy and operational execution, reducing the 70% of payment transformation initiatives that fail due to misalignment. ▪ Complexity Management: Payment organizations typically manage 250-350 distinct business capabilities, requiring systematic mapping to eliminate overlaps and identify gaps. ▪ Operational Clarity: Well-structured capability models eliminate the ambiguity that causes process inefficiencies, organizational conflicts, and customer experience breakdowns. ▪ Technology Rationalization: Capability mapping reveals the redundant systems and duplicate functionalities that consume 30-40% of typical payment IT budgets. ▪ Architecture Foundation: Capability maps provide the business context essential for technology architecture decisions, ensuring investments enhance strategic capabilities rather than just replacing legacy systems. www.capstera.com 3

4. The Anatomy of Payment Capabilities 2 Payment capabilities follow a structured hierarchy that balances strategic insight with operational detail. Understanding this structure is essential for creating capability maps that drive meaningful business results rather than becoming academic exercises. ▪ Definition Precision: Each capability represents a distinct business function that delivers specific outcomes, operates independently, and can be assessed for performance and maturity. ▪ Hierarchical Organization: Effective payment capability maps typically use 3-4 levels of detail, from Level 1 strategic categories to Level 4 operational capabilities. ▪ Business Focus: Capabilities describe what the business does rather than how it does it, providing stability even as processes, organizational structures, and technologies evolve. ▪ Implementation Independence: Capabilities remain consistent regardless of whether they are performed in- house, outsourced, or automated, enabling objective strategic decision-making. ▪ Outcome Orientation: Capability definitions focus on business outcomes produced rather than activities performed, linking directly to measurable performance metrics. www.capstera.com 4

5. Essential Payment Capability Domains 3 The payments value chain encompasses distinct capability domains that must work in harmony to deliver seamless customer experiences. Understanding these domains creates the foundation for comprehensive capability mapping. ▪ Customer Management: This domain encompasses the capabilities that enable customer acquisition, onboarding, servicing, and relationship management across both merchant and consumer segments. ▪ Payment Processing: These core capabilities include payment acceptance, authorization, clearing, settlement, and reconciliation functions that form the heart of payment operations. ▪ Risk Management: This critical domain includes capabilities for fraud detection, compliance management, dispute handling, and security operations that protect both the business and its customers. ▪ Product Management: These capabilities enable product development, pricing, bundling, and lifecycle management that drive revenue growth and competitive differentiation. ▪ Platform Orchestration: These increasingly important capabilities manage APIs, developer experiences, partner ecosystems, and marketplace operations that extend your payment reach. www.capstera.com 5

6. Capability-Based Pain Point Resolution 4 Payment organizations typically struggle with specific operational pain points that capability mapping directly addresses. Identifying these challenges focuses the mapping effort on areas with immediate business impact. ▪ Fragmented Customer Experience: Capability mapping reveals the 5-7 organizational handoffs that typically create friction in customer journeys, enabling streamlined cross- functional processes. ▪ Regulatory Compliance Overhead: Clear capability ownership reduces the regulatory burden by assigning specific compliance requirements to responsible business functions. ▪ Technology Redundancy: Mapping applications to capabilities typically identifies 20-30% systems redundancy where multiple solutions perform the same business function. ▪ Innovation Bottlenecks: Capability assessment pinpoints exactly where legacy systems and processes constrain product innovation and time-to-market. ▪ Resource Misallocation: Capability-based investment analysis reveals that most payment organizations overinvest in non-differentiating capabilities while underinvesting in strategic differentiators. www.capstera.com 6

7. Did You Know According to McKinsey, payment organizations with mature ▪ capability mapping practices complete major transformation initiatives 40% faster and with 30% higher success rates than those without this foundation. www.capstera.com 7

8. Capability Assessment Methodology 5 Creating the capability map is only the first step. Systematic capability assessment transforms the static map into a dynamic decision-making tool that drives strategic prioritization and investment. ▪ Maturity Evaluation: Each capability should be assessed across dimensions including process maturity, technology support, information availability, and skills adequacy. ▪ Strategic Importance: Capabilities must be classified based on their contribution to competitive advantage, from table- stakes utilities to strategic differentiators. ▪ Performance Measurement: Leading payment organizations link each capability to specific KPIs that measure its contribution to business outcomes. ▪ Gap Analysis: Systematic comparison of current vs. required capability maturity reveals precisely where investments will deliver maximum strategic impact. ▪ Heat Mapping: Visual representation of assessment results helps executives quickly identify capability strengths, weaknesses, and investment priorities. www.capstera.com 8

9. Optimizing Payment Operations Through Capability Analysis 6 Capability mapping reveals the operational inefficiencies that constrain payment performance. This insight enables targeted improvement initiatives that deliver measurable business impact. ▪ Process Optimization: Capability-based process analysis identifies the cross-functional workflows that create 60-80% of operational bottlenecks in payment organizations. ▪ Organizational Alignment: Clear capability ownership eliminates the functional silos and accountability gaps that cause most operational failures. ▪ Resource Optimization: Capability-based workforce planning ensures skills and headcount align with strategic priorities rather than historical allocations. ▪ Service Level Enhancement: Capability performance metrics enable precise tracking of operational improvements and their impact on customer experience. ▪ Cost Reduction: Operational capability assessment typically identifies efficiency opportunities worth 15-25% of operating costs through elimination of redundant activities. www.capstera.com 9

10. Technology Rationalization Through Capability Mapping 7 Technology complexity is a significant challenge for payment organizations. Capability mapping provides the business context essential for effective rationalization and modernization. ▪ Application Portfolio Assessment: Mapping applications to capabilities reveals the redundant systems, functional gaps, and architectural issues that constrain technology effectiveness. ▪ Investment Prioritization: Capability-based technology planning ensures investments target the systems that support strategically important business functions. ▪ Build vs. Buy Decisions: Capability assessment provides the business context for determining which technologies should be developed in-house versus purchased. ▪ Legacy Modernization: Capability mapping identifies exactly which legacy systems constrain strategic capabilities and should be prioritized for replacement. www.capstera.com 10

11. Enabling Innovation Through Capability Enhancement 8 Payment innovation increasingly determines competitive success. Capability mapping identifies exactly where targeted investments will accelerate innovation and time-to-market. ▪ Innovation Focus: Capability assessment pinpoints the specific capabilities that most impact product innovation speed and effectiveness. ▪ Ecosystem Enablement: Capability-based API strategies identify exactly which business functions should be externalized to support partner integration. ▪ Digital Acceleration: Capability mapping reveals where digital enablement will deliver maximum customer experience impact and operational efficiency. ▪ Emerging Technology Targeting: Capability assessment helps determine exactly where technologies like AI, blockchain, and IoT will enhance strategic business functions. ▪ Talent Development: Capability-based skills assessment identifies the specific expertise gaps that constrain innovation and must be addressed through hiring or training. www.capstera.com 11

12. Did You Know Gartner research indicates that payment organizations ▪ using capability-based technology planning reduce IT costs by 20-30% while increasing business satisfaction with technology delivery by 40-60%. www.capstera.com 12

13. Capability-Driven Regulatory Compliance 9 Payment organizations operate in a highly regulated environment. Capability mapping creates the foundation for efficient, effective compliance without excessive overhead. ▪ Regulatory Mapping: Systematic association of regulatory requirements with specific capabilities ensures comprehensive compliance coverage without duplication. ▪ Control Integration: Capability-based controls design embeds compliance into business operations rather than treating it as a separate overhead function. ▪ Compliance Efficiency: Clear capability ownership for regulatory requirements eliminates the redundant compliance activities that typically consume 15-20% of compliance budgets. ▪ Audit Readiness: Capability-based compliance documentation provides the end-to-end traceability that streamlines regulatory examinations and reduces findings. ▪ Regulatory Change Management: Capability mapping enables rapid assessment of how regulatory changes impact specific business functions, accelerating compliance adaptation. 13 www.capstera.com 13

14. Capability-Based Merger & Acquisition Optimization 10 M&A activity remains high in the payments sector but faces high failure rates. Capability mapping dramatically improves both target selection and post-merger integration. ▪ Strategic Fit Assessment: Capability comparison between acquirer and target reveals exactly where combinations create complementary strengths versus problematic overlaps. ▪ Integration Planning: Capability-based integration roadmaps focus on the specific business functions that drive anticipated M&A value rather than broad organizational mergers. ▪ Redundancy Identification: Systematic capability mapping across merging entities identifies the specific functional overlaps that create cost synergy opportunities. ▪ Cultural Alignment: Capability assessment helps identify areas where different operating approaches may create integration friction requiring management attention. ▪ Value Realization: Capability-based integration metrics provide precise tracking of synergy realization against M&A business case projections. www.capstera.com 14

15. Building Your Payment Capability Map 11 Creating an effective payment capability map requires a structured approach that balances comprehensiveness with usability. This methodical process ensures the resulting map delivers actionable business insights rather than becoming an academic exercise. ▪ Scope Definition: Successful capability mapping starts with clear boundaries regarding organizational units, geographies, and business domains to be included. ▪ Level 1-2 Mapping: Initial mapping focuses on 8-12 Level 1 categories and 40-60 Level 2 capabilities that provide the strategic framework for the complete model. ▪ Capability Decomposition: Progressive decomposition expands the model to include 150-250 Level 3 capabilities that provide operational detail without overwhelming complexity. ▪ Relationship Mapping: Effective capability models document the interdependencies between capabilities that impact organizational design and process optimization. ▪ Validation Process: Rigorous review with business and technology stakeholders ensures the capability map accurately reflects organizational reality and strategic priorities. www.capstera.com 15

16. Implementing Capability-Based Transformation 12 Developing the capability map creates potential value, but implementation delivers actual business results. A structured approach to capability-based transformation ensures the model drives meaningful organizational change. ▪ Strategic Alignment: Successful transformation starts by explicitly linking strategic objectives to specific capability enhancements that drive competitive advantage. ▪ Roadmap Development: Capability-based transformation roadmaps sequence initiatives based on business impact, implementation complexity, and dependency management. ▪ Governance Establishment: Effective implementation requires clear capability ownership, decision rights, and performance metrics that drive accountability for results. ▪ Change Management: Capability-based communication helps stakeholders understand how transformation initiatives connect to business outcomes rather than seeing them as abstract projects. ▪ Continuous Evolution: The capability map should be treated as a living document that evolves as business strategy shifts and operational insights emerge from implementation. www.capstera.com 16

17. Measuring Capability-Based Transformation Success 13 Capability-based transformation must demonstrate measurable business impact to maintain executive support and funding. A balanced scorecard approach helps quantify both immediate results and long-term value. ▪ Operational Metrics: Capability enhancement typically improves key operational indicators including processing times (20-30% reduction), error rates (40-60% reduction), and customer satisfaction (15-25% improvement). ▪ Financial Outcomes: Mature capability-based transformation delivers measurable financial results including cost reduction (15- 25%), revenue growth (10-20%), and improved capital efficiency (20-30%). ▪ Strategic Indicators: Long-term transformation success appears in strategic metrics including time-to-market (30-50% reduction), innovation rate (40-60% improvement), and competitive position (15-25% enhancement). ▪ Risk Reduction: Capability maturity directly impacts risk outcomes with mature capabilities showing lower fraud rates (30-40% reduction), fewer security incidents (40-60% decrease), and reduced compliance findings (50-70% improvement). ▪ Organizational Benefits: Capability clarity delivers cultural benefits including improved cross-functional collaboration, enhanced employee engagement, and more effective talent development. www.capstera.com 17

18. Future-Proofing Your Payment Capability Model 14 The payments landscape continues to evolve rapidly. Maintaining the strategic value of your capability map requires systematic monitoring of industry trends and potential disruptions. ▪ Emerging Capability Identification: Regular horizon scanning identifies new capabilities like Embedded Finance, Cryptocurrency Management, and Real-time Cross-border Settlement that should be incorporated into the model. ▪ Ecosystem Evolution: Capability models must increasingly extend beyond organizational boundaries to include partner, customer, and supplier capabilities that impact your value proposition. ▪ Technology Impact Analysis: Forward-looking capability planning assesses how emerging technologies like AI, quantum computing, and decentralized finance will transform existing payment capabilities. ▪ Regulatory Anticipation: Capability maps should be continuously updated to reflect emerging regulatory requirements including Central Bank Digital Currencies, Open Banking, and Enhanced Data Privacy. ▪ Competitive Monitoring: Regular assessment of competitor capabilities helps identify strategic capability gaps that require accelerated investment to maintain market position. www.capstera.com 18

19. Moving from Capability Mapping to Capability Mastery 15 Capability mapping is the foundation, but capability mastery drives sustainable competitive advantage. This evolution requires moving beyond modeling to systematically enhancing the capabilities that differentiate your payment organization. ▪ Capability Centers of Excellence: Leading organizations establish dedicated teams responsible for continuously advancing critical capabilities through research, innovation, and best practice development. ▪ Capability-Based Budgeting: Mature organizations allocate resources based on capability strategic importance rather than departmental negotiation, dramatically improving investment effectiveness. ▪ Performance Acceleration: Systematic capability enhancement initiatives combine process optimization, technology modernization, and skill development to drive breakthrough performance. ▪ Continuous Benchmarking: Regular comparison against industry leaders identifies capability gaps and performance improvement opportunities that inform ongoing investment priorities. ▪ Culture Transformation: True capability mastery requires evolving organizational culture from functional silos to end-to- end capability ownership that focuses the entire organization on customer outcomes. www.capstera.com 19

20. Takeaway Business Capability Maps provide payment organizations with the critical foundation for strategic alignment, operational optimization, and technology rationalization. By creating a comprehensive view of what the business does independent of how it does it, capability mapping enables precise diagnosis of performance gaps, targeted investment in strategic differentiators, and systematic transformation that delivers measurable business results. In the rapidly evolving payments landscape, organizations that master capability-based transformation consistently outperform competitors in operational efficiency, innovation effectiveness, and strategic agility. 20 www.capstera.com 20

21. Next Steps 1. Assess your current capability mapping maturity to identify gaps and establish a baseline for improvement measurement. 2. Develop a Level 1-2 capability map for a high-priority business domain experiencing significant operational or technology challenges. 3. Conduct a strategic capability assessment to identify the specific capabilities that drive competitive differentiation and deserve priority investment. 4. Create a capability-based application portfolio map to identify rationalization opportunities and modernization priorities. 5. Establish capability governance mechanisms that embed capability-based thinking into strategic planning, budgeting, and performance management processes. 21 www.capstera.com 21

22. Capstera is a treasure trove for Business and Enterprise Architects. ▪ Capability Maps for Various Functions and Sectors. ▪ Value Streams ▪ Business Data Models ▪ Insights ▪ Tools, Templates, and Tutorials Stay in touch with Capstera. www.Capstera.com https://www.linkedin.com/company/capstera https://www.X.com/Capstera https://www.facebook.com/capstera Note: Capstera’s products and their contents may differ from the general information offered in these guides.) 22 www.capstera.com 22

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