The Suncorp pitch: Core banking overhaul matters


news Tier two banking and insurance giant Suncorp has started talking up the benefits of its Oracle-based core banking platform overhaul to the financial markets, following rival the Commonwealth Bank in arguing that its own modernisation and simplification program will bring significant business benefits that will affect its customers and its bottom line.

Over the past five years a fierce debate has raged within the upper echelons of Australia’s banking technology sector. Core banking platforms sit at the heart of any bank and constitute the base on which the bank’s technology platform is built – for example, modern applications such internet banking systems commonly sit on top. However, many of Australia’s banks have core banking platforms that have been in place for decades – often built on mainframe technology – and are becoming increasingly unwieldy and difficult to maintain.

The Commonwealth Bank of Australia has taken a lead in front of the other banks when it comes to overhauling the notoriously difficult core platforms at the heart of its operation. Its $1.1 billion program has been based on SAP and built with the assistance of Accenture, guided by chief information officer Michael Harte, who has emerged as the nation’s chief advocate of core banking platform modernisation.

Harte has argued that banks need to see themselves as being in competition with traditional technology vendors such as Google and Apple rather than as being traditional financial services organisations. And indeed, this week CommBank gave a detailed product briefing disclosing a series of minor upgrades to its Internet banking platform, listing the new features much as a technology vendor would in a media release. National Australia Bank has also put its foot in the water on its own core revamp based on Oracle, but others such as Australia and New Zealand Banking Group and Westpac appear to be holding off for now to focus on other projects, stating that there was no immediately need for the sort of billion-dollar investment in IT which their rivals have carried out.

ANZ Bank chief information officer Anne Weatherston has rejected claims the bank’s technology platform is falling behind that of rivals, stating billion-dollar IT splurges by the likes of the Commonwealth Bank in recent years were necessary because of a lack of ongoing investment in technology infrastructure throughout the past several decades.

For its own part, Suncorp — one of the nation’s few remaining tier two banks, with an additional sizable insurance business — had been mulling a core overhaul for several years. In January it bit, with its chief information officer Jeff Smith (pictured) disclosing that the group would conduct a core overhaul with Oracle, along the way shifting off its existing Hogan platform from CSC. This week, as Harte has done with CommBank, Smith took the concept to investors in a high-profile briefing at Suncorp’s investor day.

Suncorp has linked its core banking overhaul program — dubbed the ‘Banking Platform Program’ — with a wider package of business simplification initiatives which follows on from the bank’s Building Blocks program, which it says it has largely completed.

The ‘simplication program’, Suncorp told investors this week, would deliver annual savings of $200 million from the 2016 financial year, through a combination of organisational redesign (which will save on financial licensing costs, for example), as well as technology rationalisation and modernisation and the use of outsourcers. The program as a whole will cost $275 million.

Currently, Smith and other Suncorp executives told the bank’s investors this week, the bank operated some 15 legacy systems on “ageing” platforms at its core. Specialist knowledge was required to maintain the “obsolete” systems, which didn’t talk to each other, and offered few streamlined workflows. Issues with the old platform included its risk profile, the cost and complexity of maintaining and developing it, the slow speed of new products to market it supported, the diminished customer experience it offered, and its ability to undermine Suncorp’s competitive positioning in the market.

To replace its legacy systems, Smith told investors, Suncorp had already implemented a new CRM and commissions platform, and would finalise a new trade finance system by June this year. The new CRM platform was already delivering a number of benefits, including improved data quality and services to Suncorp’s brokers; and it is also slated to deliver learnings for the bank in the next stage of its platform modernisation.

That next stage — currently under way, but with no completion date noted, although the bulk of the work is expected to be done through 2016 — will see the bank deliver a “complete” new platform, “from origination to fulfilment”. The third stage of the process will see the bank decommission and archive its old systems and data.

According to Smith, the new platform will deliver improved reliability; greater speed to market for new products, more intuitive systems for staff and customers, a customer-oriented versus a product oriented system, better and more efficient service, a stable, sustainable technology model and a system capable of scalability “without additional investment”.

The comments largely mimic the message which the Commonwealth Bank has pushed with its own investors with respect to its own core banking system overhaul. In March 2011, CBA CIO Michael Harte and other executives from the bank said it was between two to five years ahead of its rivals with respect to its technological capability.

The bank’s CEO Ralph Norris said the bank was already seeing benefits from the project, with volumes of customer service calls dropping, positive comments from customers rolling in and the bank’s ability to roll out new financial products such as its new GoalSaver deposit platform being streamlined. In addition, Harte noted later on that the bank’s number of severity one technology incidents had dramatically reduced — down 94 percent from 2006, when it had 66 such outages. And it has continually deployed new financial products and services over the past several years on the back of its overhaul.

I’m not surprised to see Suncorp pushing its core banking modernisation platform in public. After all, the program has been under way for beyond a year now, and it’s been public knowledge for virtually that entire time that Suncorp had picked Oracle and was progressing its plans to follow CommBank with a big core overhaul project.

It will be interesting to see if the bank, in a few years’ time, will be able to speed up its pace of product development to customers as CommBank has. It’s my impression, after speaking to various Suncorp executives over the years, that Suncorp is a lot better place to work than CommBank, with a much better internal IT development ethos and a more agile outlook on things. It will be interesting to see if the bank can use that kind of flexibility to encroach further onto the Australian banking sector and establish itself as an effective rival to the big four.

It will also be interesting to see if CommBank, NAB and Suncorp can open up a gap in terms of their customer-facing capabilities compared to their rivals Westpac and ANZ over the next few years, as their various core banking initiatives deliver. Certainly CommBank’s Internet banking and other customer-facing systems are leagues ahead of its rivals right now. It will be interesting to see NAB and Suncorp are able to achieve similar advantages.

Image credits: Delimiter, Suncorp