Based in Hungary, OTP Bank delivers financial services across eight Eastern European countries. The bank, founded in 1949, serves 10.1 million customers across 1,300 branches. In 2006, it purchased three Serbian banks—Niska Banka, Zepter Banka, and Kulska Banka. To comply with local regulations for the financial services industry, OTP Bank had to integrate the banks’ three disparate core banking systems by May 2007 so that they could operate as a single entity, in line with the regulations set by the Serbian Central Bank. Working with Microsoft® Gold Certified Partner SAGA, OTP Bank installed a centralised payment hub based on Microsoft BizTalk® Server 2006, Microsoft BizTalk Accelerator for SWIFT, and Microsoft SQL Server® 2005, as well as a Connected Payment Factory solution from SAGA. In just 60 days, OTP Bank integrated its three Serbian entities and met the May 2007 deadline.
Hungary-based OTP Group delivers a wide range of financial products and services to retail, corporate, and high net worth customers throughout Eastern Europe. The bank serves 10.1 million customers across 1,300 branches. Like any leading financial institution, OTP Group has a highly acquisitive business model. In 2006, it decided to expand into the Serbian market by purchasing Niska Banka, Zepter Banka, and Kulska Banka. While trading as separate entities, each of the banks held its own zero account with the Serbian Central Bank. To operate as a single entity, OTP Bank (Serbia), all three banks needed to use the same account with the Central Bank.
But each bank had its own core banking system, based on a different technology. The banks also structured their customer account numbers differently and used three separate bank identification codes. The bank had to align these disparate structures by May 2007 to comply with Serbian Central Bank regulations.
Srboslav Racic, Head of IT and Logistics, OTP Bank (Serbia), says: “Transferring all three banks to a single system would have been expensive, risky, and time consuming. We wanted to choose a method that would allow all three banks to work as a single entity immediately.”
In short, the bank needed to integrate these three systems onto a single real-time gross settlement payments connection to the clearing house and central bank. But rather than undertaking a long and risky core system replacement process, OTP Bank decided to create a centralised payment hub. This would allow all three banks to keep their existing core banking systems and processes, while operating as a single institution.
The bank also wanted to establish a centralised cash pool structure that would provide real-time liquidity management across all three subsidiaries.
Time was a crucial factor. Racic says: “We couldn’t afford to miss the regulatory deadline because the bank would lose its licence. The alternative—requesting an extension from the central bank—would have resulted in a loss of reputation. Finding a solution that could be deployed rapidly was vital.”
OTP Group decided to work with Microsoft® Gold Certified Partner SAGA, which already had a long-standing, successful relationship with Zepter Bank. In February 2007—with just two months to go before the Serbian Central Bank’s deadline—the deployment began.
OTP Bank chose to create a centralised payment hub by using Connected Payment Factory from SAGA. The payment factory runs on Microsoft BizTalk® Server 2006 and Microsoft SQL Server® 2005 database software. Microsoft BizTalk Accelerator for SWIFT converts payment messages to the SWIFT messaging standard. Zlatko Jegdic, Head of eBusiness, SAGA, says: “We always use the latest Microsoft products and work closely with the Microsoft financial team to ensure we are up to date. BizTalk Server 2006 delivers the best possible foundation for our solution.”
The payment hub sends and receives payments messages by using a single connection. It also provides payment visibility across all three subsidiaries and helps them separate all incoming payments so they can be returned to the correct core system.
Instead of sending payments directly to the central bank or clearing house, all three banks send their payments messages to the payment factory.
Within the hub, all payments are translated into a single payment format and then transmitted to the central bank in a single batch. Crucially, the system also forwards and separates clearing messages to make sure that all completed payments are returned to the correct core banking system. Racic says: “Keeping payments separate was very important because we needed to ensure transactions were delivered to the correct account. The payment hub helps us achieve this in a seamless, automated way, with no inconvenience to our staff or customers.”
To improve its liquidity management, the bank also centralised one of its existing cash management modules. This is also connected to the payment hub, providing a single point of visibility for all the bank’s payments and assets.
Most importantly, the bank completed the entire implementation in just 60 days. Racic says: “We definitely chose the right solution. Considering the implementation usually takes up to 12 months, the speed at which the solution was deployed was astonishing.”
OTP Bank (Serbia) is now fully operational and the three subsidiaries work smoothly as a single entity. The bank is working with SAGA on a roadmap, which will make the solution SEPA-ready so that it can be used to process all international payments.
OTP Bank Achieves Compliance in Just 60 Days
OTP Bank was able to meet the Central Bank’s compliance target in just 60 days. This represents a time saving of 85 per cent compared with the traditional, 12-month integration period.
Bank Integrates Three Subsidiaries with Minimum Cost and Disruption
By choosing to create a payment hub instead of undergoing system replacement, OTP Bank was able to reduce the cost and disruption of integration. All three banks still use their existing core banking systems and have not had to spend time and money amending their internal processes. The change is simple—instead of sending payments directly to the central bank or clearing house, they send them to the payment factory to be converted into a standard format. This has not only accelerated the speed of integration, it has also eliminated any risk associated with process change.
Transparent Solution Leads to Improved Liquidity Management
By integrating its cash management module with the payment factory, OTP Bank now has complete visibility of all its assets across the three subsidiaries. This is a crucial part of helping them operate as a single bank. Racic says: “Since the reforms introduced by the Serbian Central Bank in 2006, visibility has become an important part of compliance. It also helps us operate more effectively as part of the OTP Group.”
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For more information about OTP Bank products and services call + 381 21 4800 -000 or visit the Web site at: http://www.otpbank.hu/
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