Client introduction

Erste Group is a major Banking Group active in 8 countries in Central and Eastern Europe. Its origin and group headquarters are in Austria. The Payment Operations in the group member banks are currently not consolidated in processes and systems but a strategic goal is to streamline and standardize operations.

Complication
With a diverse landscape of Payment Operations carried out in the countries, with different currencies, levels of maturity, infrastructure and local payment customs, the Group wants to set a strategic roadmap for centralization of payments processing, striking the best balance between local autonomy and central efficiency. This requires an assessment of payments functions across all business sectors (retail, corporate, capital market), payments types (domestic, SEPA, local/foreign currency), customer channels and clearing channels, architecture and application landscape, as well as finding governance and funding models for services operated centrally (mandatory or optional for the country member bank) or decentrally.
Having completed the SEPA migration for the Euro-in countries, with migration for non-Euro countries by early 2016 upcoming, the next step was to reassess the potential for centralization of payments functions to support compliance, and the evolving customer requirements, notably for the corporate segment where the Group has a growth ambition. The main element was felt to be the need for a centralized payment hub. A “home-grown” Generic Payments Function (GPF; conceived as an internal payments hub) exists but was considered functionally incomplete and had been only partially rolled-out to the Group member banks. In some banks, package solutions were being used. Payments Advisory Group was asked to conduct a refresh of the Group’s internal and external strategic requirements, and provide a staged approach strategy plan towards completion and roll-out of GPF, indicating what functions could be supplied by buying or making application platforms.

Proposed Solution
Payments Advisory Group proposed to conduct interviews with stakeholders from Group business and operations functions, and from the member banks (the countries) and work with the Group Holding management to create a feasible directional document, to support the Group strategic programmes for all payments processing, including possible reactions to new trends like mobile channels, regulatory change like PSD2, and topics such as building strategic API-capability.

Execution & Result
After a series of initial interviews, and review of existing architectural material and earlier external assesments, Payments Advisory Group’s consultants created a strategic directional view, supported by advice on structuring of payments governance within the Group and controlling of the roadmap of GPF. It also allowed for active managing of innovative pressure. The direction was adopted and will be implemented by the Group’s own staff. One strategic vendor solution was confirmed to become mandatory for the Group, for other applications the analysis and vendor selection will be done along the staged multi-year approach to GPF. The project was completed in 14 weeks.

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