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Innovation Down Under

If the bank technology world could be said to have a rock star, that would arguably be Michael Harte, CIO of Commonwealth Bank of Australia. When he was scheduled to speak at a conference last year, a crowd gathered outside the auditorium doors a good 20 minutes before start time so people could be sure of a seat up front. His every public utterance is reported, usually admiringly, by Australia's technology press. He's been an outspoken advocate of cloud computing, open source computing, mobile payments and the need for banks to compete better with nimble digital companies like Google, PayPal and Facebook.

Harte's team began promoting cloud computing about five years ago, touting such benefits as being able to buy computing services across a network and pay for them on demand. "Where we're disappointed with service quality and/or price, we want to have the opportunity to switch," he says.

The Commonwealth Bank works with two of the leading international cloud user groups, the Open Data Center Alliance and the Enterprise Cloud Leadership Council, to come up with common definitions and standards.

Within the bank, "We've done storage as a grid, we've done development provisioning on demand, we've moved significant parts of our web properties out into the public cloud," Harte says.

Harte doesn't have much empathy for bankers who are too concerned about security and privacy to try cloud solutions.

"There's a lot of conjecture in the industry that country regulations hold data sovereignty as paramount and therefore the public cloud is not good because you don't know where your data is going end up, that in the cloud you're less secure," Harte says. "Quite frankly, that's all baloney, it's just an excuse not to, and we're just going to keep working with other buyers to create standards so that we can have innovation and make sure there's competition and innovation that take us closer to the promise of on-demand [computing]."



The Commonwealth is the largest bank in Australia, with $135 billion in liquid assets, 14 million customers and 52,000 employees.

It's just-completed core conversion took four years; the total tab is an estimated $2 billion. The bank now mostly runs on SAP for Banking, on a host of IBM mainframes, power servers and storage systems.

The bank now has a real-time transaction engine with savings, deposits, loans, and all customer information in one shared repository.

The Commonwealth is one of the few large banks to have such a thing.

"While legacy systems are inherent in all large financial institutions, few have had the courage to challenge and execute the necessary changes," Harte asserted earlier this year. "Our core banking modernization will place us well ahead of our competitors."

All of this sets the stage for the bank's next step in its technology transformation: the development of customer analytics that let it make real-time decisions about pricing, credit, product recommendations and more. CBA has invested in SAS Real-time Transaction Monitoring as a behavioral engine to interface to its SAP Core Banking system, to improve customer experience, monitor credit risk and mitigate against fraud.

"Financial services used to be done very intimately face-to-face," Harte points out. "We'd make an appointment with a person to talk about a home loan. Generally the bank manager was a community-minded person who only had to deal with 30-40 relationships and often knew all about the family from previous generations. They could make a loan decision during the customer conversation because they knew that person was of good character and had the necessary collateral and the credit. It was all based on an intimate and knowledgeable relationship."

As the Commonwealth and other banks like it have gone nationwide and then international, growing their customer bases into the tens of millions, and diversifying into different products and services, that customer intimacy has been lost, he argues.

"All the technologies we're putting in place tend to emulate that intimacy, so that if somebody has a great idea, you can help them make a decision straight away and model something specific to them," Harte says. "Or, if we've got all the information we need, we can rebalance their portfolio and suggest they reduce risk, retire some debt, and move some money around for longer-term planning for retirement or provision for their children's college education. We want to be able to be reactive in the moment our customers come to us for help, and proactive in advance so we have the analytics to suggest a better way to spend or save or invest."




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