Are you sure?

Banking IT firms branching out

The IT systems of most banks are made up of a mishmash of several different systems, with usually just more and more software getting slapped onto mainframes over the years. Some say it is too risky and inefficient to have only one supplier, while others dream of a single unified IT system.

When you see an overwhelmed bank employee frantically tapping away at his keyboard or clicking the mouse of his computer, he is probably switching between various applications to sort things out. Most banks tend to use lots of different IT systems and overlapping databases, which results in slower customer service, among other things.

A few big banks are trying to improve the situation. UniCredit, for instance, has set up a global ITC company, UniCredit Global Information Services (UGIS) by merging its Italian, German and Austrian ITC operations. The merger was a key step for the standardization of the business and IT platforms used by UniCredit group members in 22 countries in Europe.

The merger resulted in cost savings of more than €300 million annually, the bank said. UGIS has nearly 4,500 employees in eight European countries and is fully responsible for the implementation and integration of all the services of the group. The merger was followed by the integration of other IT facilities in Central and Eastern Europe.

Hungarian mortgage bank FHB has also spun out its IT activities into a wholly-owned subsidiary, FHB Szolgáltató Zrt. The company provides other services to the group as well, such as payroll and logistics.

More suppliers, less risk

In Hungary, banks obtain their software from three sources, KPMG partner Tamás Gaidosch told the Budapest Business Journal. In rare cases, if they can afford an extensive IT team to develop a core banking system in-house, they get it from their foreign parent banks, but usually banks buy their core software from large international suppliers, such as iFlex, Temenos or Misys. The third source includes Hungarian vendors who participate in smaller projects to set up so-called satellite systems. While KPMG is not involved in software development, it provides support for the design and introduction of such systems in order to help clients manage technology risks, Gaidosch said.

Bank experts say that using only one supplier for all systems would be too risky for any financial institution where security is a number one priority. Therefore most banks use several suppliers for their different systems which, above a certain project value, are selected through tenders. Depending on the size of the bank, the threshold is between HUF 10 million and HUF 100 million.

Almost all foreign-owned banks also work with small Hungarian firms, as they generally do not have enough capacity to do everything internally, while Hungarian suppliers are also usually cheaper and have local expertise.

In case of major projects, OTP Bank calls either open or restricted tenders, while for smaller systems suppliers are contacted directly based on their expertise in financial technology, the bank told the BBJ. Due to the complexity of the systems, the bank works with different suppliers in each area, the bank said.

Core group

There is a group of Hungarian vendors that gets an invitation to most tenders – this includes IQSYS, Loxon, Alvicom, Alerant and T-Logic. Hungarian software developers are usually specialized in a certain segment: Loxon offers integrated lending and risk management solutions, Alvicom provides analytical and testing services, while Alerant specializes in electronic banking channel solutions, such as mobile and internet. These firms are not simply software developers, but provide input for entire business processes.

Banks are now aiming to build strategic partnerships with their local suppliers. This means that they sign a framework agreement with the selected vendor for one to three years. The result is a closer, more effective cooperation between customer and supplier.

According to OTP Bank, the main challenge on the market is introducing new assets and technologies into the relatively conservative bank technology environment. A quick response to actual market developments is vital, with special attention paid to security.