Oracle Makes Bold Bid for Large-Bank Business

With the launch today of its Oracle Banking Platform, Oracle is staking a claim to be an enterprisewide IT provider for big banks.

"The target is large banks doing significant transformation programs for their domestic markets," says Ashwin Goyal, group vice president for financial services.

Oracle spent three years building the platform, mostly in Java with a services-oriented architecture. It is for big banks that have complex IT environments and need to modernize but can't take a rip-and-replace approach because of the excessive business risk.

"What they're looking for is a way to transform progressively," Goyal says. They might start with a few components and over time replace more and more of their IT portfolio.

Oracle Banking Platform is made up of three sets of Oracle products, mostly written in Java. One is the core banking software, which is based on knowledge and ideas inherited from i-flex, the former Citi subsidiary that developed Flexcube. Flexcube, which is still being marketed, complements the new platform but is designed for a different market. Flexcube is for large banks seeking one platform for their international operations. For instance, Citi runs its commercial deposits business in 95 countries on Flexcube. It's also meant for banks in emerging countries and smaller banks looking for a single platform they can use to do a rip-and-replace of their entire banking operations.

The second component is cross-industry applications such as customer relationship management, master data management, financial software and analytics. The third set is middleware technology, such as Oracle's SOA suite, security tools and enterprise service bus (formerly a product of BEA software).

"One reason we feel large banks are looking for change is because the complexity of what they have to deal with behind the screen is significant," Goyal says. "They tend to have a lot of custom-written and customized software with complicated integrations, such that making even a simple change to the systems requires a lot of time. What you're really doing is regressing and making sure something doesn't break. Even if you're adding a product feature, that requires a tremendous change."

Oracle developed its new platform with two Australian banks, National Australia Bank and Suncorp. "We wanted to make sure we didn't do this in a vacuum, we didn't want to put our 500 engineers into an ivory tower and say go build us the best system and we'll see if it will meet the needs of a bank," Goyal says.

NAB is doing a massive transformation program, during which it will shut down 100 existing systems and shift that work over to Oracle. So far it has put its direct banking unit, UBank, on the system and took it live in August. One feature of the new system is five-minute account openings. About 300,000 customers are using the new platform.

Suncorp began using Oracle Banking Platform for a "bank simplification" program a year and a half ago, Goyal says. Phase one was putting CRM capability in place for all bankers and staff. As part of phase two, work has begun to replace the bank's legacy core system, a customized deployment of Hogan software. In time, the bank will shut down more than 40 systems to run various Oracle components.

"One of the big things we speak with banks about is coexistence," Goyal says. "For a period of time, you have the old world and the new world, and you need to create some level of coexistence between the old and new. You absolutely have to invest in creating the new world while the old world exists

Both banks are looking at this as a way to improve their efficiency ratios, currently in the mid-40s, to the mid-30s. They're looking for operational efficiencies. "The mortgage process has 45 manual steps today and it isn't documented anywhere what those 45 steps are," Goyal says. "In the new world, it's almost all straight-through processing with two or three points of human intervention. So you get a lot of efficiency and you take cost out of the interactions."