Core banking overhaul is a false dichotomy


blog The Australian Financial Review took another stab this morning (paywall) at digging some form of core banking systems overhaul strategy out of ANZ Bank, in an interview with Phil Chronican, the chief executive of the bank’s Australian business.

In it, Chronican reiterates the bank’s long-held position that no, it doesn’t need to overhaul its core banking technology (read: mainframes) and yes, the kids are alright (read: money is being spent to ensure internet banking remains up).

It’s a song that ANZ has been singing for some time, despite the best efforts of journalists and vendors to prod the bank into some form of massive technology investment. The second verse goes something like the bank is much more focused on investing in its Asian expansion than tinkering under the hood with risky IT overhauls that could give it engine trouble. Says Chronican:

“Core system replacements are very high risk and very hard projects, which is why most banks put them off for as long as possible … building applications outside of the core systems means you can effectively put off core system replacements for a very long time.”

There’s a reason the bank is so defensive. Over the past several years, Commonwealth Bank chief information officer Michael Harte and his superior officer, chief executive Ralph Norris, have been talking up the bank’s $730 million Accenture and SAP-backed core overhaul greatly. Terms like ‘real-time banking’ and ‘speed to market’ have been running rife. So naturally the other banks are feeling a bit under pressure to follow the CBA’s lead.

It’s a topic that also came up at the recent wide-ranging briefing held by Westpac tech chief Bob McKinnon, held days after the bank delayed its own core overhaul. McKinnon was at pains to defuse the CBA hype, pointing out Westpac subsidiary St George already had real-time banking, and there was much that could be done without it anyway.

Personally, I think the argument in favour of banks upgrading their core systems has not yet been made persuasively enough in Australia.

The CBA has been on a high-spending tech roadmap for the past decade — first with the CommSee project, and now with its core overhaul. But then, it needed to — it probably had the most archaic systems of any bank to start with. And why should all of the other banks play follow the leader if there are bigger problems that need to be solved?

I’d like to see the other major banks talk a bit more in public about this. It’s fair enough for the CBA to hype up its core overhaul constantly — when you’ve spent a pretty penny, you need to show something for it. But that doesn’t mean the other banks need to constantly sign up to the public narrative the CBA is creating for them — “core overhaul or not” is pretty much a false dichotomy — and even the Commonwealth Bank knows it.

Image credit: Belinda Lester, Creative Commons


  1. Renai

    Good insight but I dont think its about “me too” plays.

    What ever you think of CBA, the reality is banking sector has the lowest trust rating post GFC and the highest community and business expectation. Hats off to Ralph and the CBA business – in the maxim of the Special Air Service (another Firm that no one wants to know what they do – but are glad that they do it!) – who dares wins!

    If they can lower their cost of service and get more commercial benefit – then good luck to them – why didnt the other banks do it before them? If the others have “real time banking” already, why didnt they give it to customers before now and what value has it given customers if they have done? Maybe they would not be losing customer sat if they had the capacity?

    Secondly, its rare for a CEO and Board to invest in something ( that in reality their successor will benefit from – so again good luck to Ralph ) that improves the customer proposition and reduces cost and makes a quid on the way – well good luck as long as the customer benefits too.

    Im not saying the situation is perfect, but its getting better than it was…..


  2. I wonder how ANZ explains away the amount of downtime their “core” computer systems have suffered this year.

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