Advice on how to start and how to run a successful core banking transformation program

In this video, @Eric Purdum, vice president – head of banking at @DXCTechnology offers advice on how to start and how to run a successful transformation program. In a banking transformation program, technology is important, and we have to figure that out but without that business buy in from the top down and the ability to want to change the DNA of the bank the transformation will not work, it just will not!

@Liberty IT Consulting Group is an Australian management consulting firm which specialises in banking transformations especially core banking modernisations and digital transformations. Our business analysts, project managers, directors, PMO professionals, engineers and agile practitioners are the finest in their field.

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TRINA: So Eric, I’m going to start with you, John referenced. CS 90 and mainstream as examples of projects where things didn’t go to plan and we’ve all been on those projects and regardless of the outcome whether benefits were realized or not without adult significant lessons are learned on those projects. So what advice would you give to senior execs on starting out on a transformation project and how to run a successful transformation?

ERIC: So I think I may own the oldest core banking system on this panel. Is that what we agree? That Hogan right been around, I think 300 years, that’s COBOL still have some assembler code, right? And when we’re talking to these Tier 1 Banks or tier 2 Banks, and especially ones that run Hogan, you know, there’s a lot of Technology conversation that’s happened and I do think that’s utterly important to the success. But what I would say to anybody wanting to entertain a transformation project, is the business buy in, and the business rationale of why you’re doing, it is the utmost importance.

I’ll give you a couple good examples. Core banking transformation are like to call a Heart surgery is not for the faint of heart, right? You really gotta want it. You got to want it to be successful and you want to be able to do it. And I think with that methodology, you need buy-in from the top on down because it isn’t just about the technology changing from a old core banking system IU Hogan to something new whatever, whatever that is right. It’s really about the business processes at the bank is undertaking today who here by a show of hands was around in year 2000ish when we did stuff with the tellers and the branches, we change systems, right? You remember the tellers when you said we’re going to take them from Green Screen to Windows?

Does anybody remember that screaming and crying that happens? There were some kicking some sorry, but it’s that kind of methodology we have to understand. You’re really changing how the bank does things all the way from the operations group, all the way to how the tellers use the system. All the way to the clients, interacting with our accounts you so that business transformation has to be bought in from the top on down technologies code will figure out the technology. There’s a lot to that as a day. We’ll probably yell at me for saying this, but you know, the technology is important. We have to figure that out but without that business buying from the top down and the ability to want to change the DNA of the bank. It will not work, it just will not. 

What must a Financial Services CIO have in her/his agenda for 2023

TRINA: Adrian, so core banking solutions were introduced as early as the 1960s. We now live in the digital era, Era? Yes. Apparently and COVID has pushed us even further ahead in digital adaption. We have near immediate payments digital wallets and no use for papers branches are cash. What must a financial services CIO having they’re toolkits in 2023.

ADRIAN TOYNTON: Thanks, I was taught us by talking about some of these completely away from technology and I think it’s about partnership. We’ve all been through core banking. I actually, when I first moved to Sydney from the UK back in 2002, I lived in this building for a year and I came over here to write business requirements for bringing a UK core banking system to Australia that project was kind that a success but to be honest I think if you want to look at how to move forward you need to find the right partner thing that that’s the first thing in terms of what the CIOs need to need to focus on. I think it’s there’s a number of different aspects. A lot of the banks and John put at the list there of done core but a lot of the banks for the last, I would say 10 years I’ve been focusing on front-end channels, customer engagement how they represent themselves out to the customer. That’s great and that provides a really good customer engagement channel. I hate this term but I’m going to use it because there isn’t one any better. A lot of that has been proven to be lipstick on a pig and ultimately, if you’re not trying to re-engineer your core system to take advantage of what is coming through your brand new channels, then ultimately that the you’re going to fail and what we’re seeing now with a lot of, a lot of our customers certainly is the focus on how do I re-engineer the core? how do I take advantage of one of our recent customers said, a Ferrari API. How do I take advantage of that into my core banking system?  If you look at a lot of legacy core banking systems. And I think we probably won’t understand why they are a lot of those systems are monolithic in size and actually being able to change those really quickly is super hard. A lot of the people that are around to actually support those systems are literally dying off, right? Those systems are built. Those systems are built in COBOL and a built-in in languages that don’t exist anymore and the people that put those don’t exist anymore. So how do you move to the next generation of core? So yeah, again for our customers, it’s looking at new technology, it’s looking here, you move from a monolithic or to a component I score. I mean, all these things are technology, but fundamentally it’s about finding the right partner.

How important is integration in an organisation’s digital or core transformation

TRINA: Stuart, the next one’s for you. It’s well known in the industry that you personally orchestrated implementation of world-leading integration Solutions. You ran the integration piece for banking beyond replacement of core help. On portent is the integration and an organization’s digital or Core transformation                  

STUART: So firstly, what you’re talking about there, is the start on the journey. Almost 20 years ago, okay? So what we did at the time was absolutely right. We had back-end systems that were cobol, but not only code will, they were the logical thing behind screens. We had platforms built in 1954 on assembler, with their own proprietary, operating system sitting on top of predestinate. So as part of that, we had to integrate into these complex back-end systems and make them easily consumable for the consumers, which we did, that’s what we’re doing for. So we focus on getting a handful of really skilled Engineers during real, the hard lifting and making it easy to consume through web services. Fantastic. Right thing to do at the time. These days when people talk about integration, I worry because it for me, it kind of evokes, think feeling it monolithic or a hub-and-spoke architecture. And you have to hope that Banks of moves a lot down the track so it’s not so hard to integrate to individual systems. And also integration per se is important that it’s a small part. So if you look at what the integration team was doing on core banking, very little of, it was technical integration per se, it was understanding that we were moving from a batch to real-time system and that we removing implicit controls that were there before you because you had back and we had to then replace them with him explicit controls, we got rid of end of day, cash balancing in a branch and so we had to do reconciliation GL.

So to me integration, it invokes a thinking of I’m integrating into NQ okay? But integration is not about that it’s about understanding into end. Okay. So I don’t like the term because when people talk about integration they think I’m building an interface in NQ but that’s not really Integrations. You probably more solution architecture, understanding how things work into it as we move forward. Why is it important? If you look at the Banks, banks moving to more and more of a domain style architecture, where what I mean by that is that section different parts of the business often built domains or platforms. And in that model, they’re free to do whatever they want in your own Circle in their own thing. But they need to have strong interfaces so people know how to interact with them. So that’s important but you’re still again, you still need to know end to end and want to. Lastly, what I will say is that the micro service is not a silver bullet. It will not solve your problems, a micro service in five years. Ten years time, you’ll have 10,000 of things flying around and you won’t know how to manage them and it will be the mess of the century. So integration. It’s not around technical integration, on to NQ. It is around understanding the end-to-end, having defined boundaries and being able to Plug and Play different components into domain architecture.

What are the elements which make up a core banking project budget

TRINA: Chris, Next question is for you so many Financial Services Organizations are frightened by the headline price tag attached to a major transformation. At Liberty, we’ve been working hard to boss that myth and explained that the product itself, own forms, only part of the cost. What are the key elements that make up a core banking project? Beyond the product itself

CHRIS: So and I think one of the worst things about the headline, the scariest thing about it is probably the uncertainty because people start on our core banking system replacement. You heard, John say that CommBank started with a budget of 600-something million. There were a little over that and, and so, I think it the good news is that the technology and things are making more, it more possible to get I guess and we would certainly push our customers to get to a minimum viable product as quickly as they can. So that, then rather than a whole lot of uncertainty, trying to build a bridge across a huge Canyon, you’re trying to do something smaller, I think Macquarie have done a very good job of this, where they delivered minimum viable product, the core functionality, and then since then, they’ve been enhancing it and they now do a release into production every two weeks, which is a great thing. So, what that says, is all the other bits that go with your core banking so the Consulting to figure out what you need to do the. The user training, the data integration, the data, migration the conversion, all those pieces, you naturally, make them smaller. You reduce the risk of blow out you’re a lot more Focus to the smaller use case. What is the customer need for this piece? And once you know that then you’re going to make less mistakes you over all you’re going to do about the same MO, probably you’re going to do less work deliver more results because you won’t have the bigger mistakes that have been made. And we saw our see us 90 in the NCS 90 had to that to change the name, because I remember that it turned out be 1990 and it hadn’t delivered.

So that was that was changed around. So there’s lots of projects on that board that John had earlier, that they were and we’re lucky and now the technology makes it easier to deliver minimum viable product, a lot easier than it used to be, but let’s not try to change the world because there’s a good chance that. When you plan out for two years, what you’re going to do, what you started with was what you thought you would should have done two years ago and by then everything’s changed anyway. So I would say that key for that is the headline scary. Yes, there’s all those other components, but if you doing data migration the smaller you do it. And even look at look again at Macquarie example, they didn’t migrate their loans portfolio to the new system. They worked out that a 30-year mortgage lasted about seven years. So in their fourth year, first of all, they had a higher Book value of mortgages on the new system than the old system and then a little bit later in the year they had a high quantity of mortgages on the new system, the old system and the complexity of moving a 30-year mortgage from one system to another and getting it right to the cent was avoided because you can do things now that you don’t need to do the hard, don’t just do the hard work, do some of the things a little bit easier. I think that was what I would suggest.

How does Australia compare to the rest of the world in real time payments

TRINA: Arun, One of the main reasons why banks are considering a core banking replacement or upgrade is to achieve 24 by 7 processing while we know Oscar payments may be achieved in near real-time and funds may appear in the recipients account within seconds. They’re still electronic transfers that you can do on a Friday afternoon before a long weekend that won’t get there until Tuesday morning. How does Australia compared to the rest of the world in this regard?

ARUN: So what I’ll do is I’ll probably drive it to the few examples and then you know that will articulate it better. What you kind of described is what I would call as a typical Financial Services Supply Chain problem, right? Because there are multiple stakeholders involved, right? And when you take the example of the likes of India and China, probably they will give you a view of you know how to benchmark on the reference you actually hand suppose you take the case of how a payment flows or a fund originates. Right transfer. Originates in say India. China. What really happens is a person like me. Who’s actually the end customers initiating, the transaction, and India has gone very big in mobile, right? Everything is actually mobile for us in a sense, so that’s the source of origination, right? And because it is on the mobile, the concept of real-time payment is absolutely necessary, right? You just can’t work with, you know, India has moved past the wallet concept everything is real-time payment so the moment the user actually puts the pressure on the infrastructure for real-time payments. The clearing and settlement system has to oblige to it, right?

So we went through a massive transformation of similar to what you’ve actually done in the NPP world, we went through a transformation as well, right? So the real-time the the infrastructure is available from a real-time perspective, but the final stakeholder is actually the core banking system in a sense. Right? what is it batch based complete real Time Etc. Right. And that’s the final stakeholder in in our ecosystem. And when you look at core banking engines, we were not among the earlier adopters, right?

The earlier adopters have been the first wave actually was the Legacy batch based system. Then you had the second wave which was pretty much 24 by 7 systems, right? And when India adopted it, we were mandated to take 24 by 7 systems. We couldn’t take batch by batch based system. So the entire core banking ecosystem in India is actually 24 by 7.   

So what really happens right from the user to the market infrastructure, to the core banking systems and actually a seamless flow in terms of 24 by 7 and because you’ve achieved it in low value payments right, now It’s become mandatory even in high-value payments. So even the high-value payment is actually both 24/7 almost near real time, right? So, so that’s possibly the, you know, closest Benchmark that everybody, you know, refers to today. And if you look at it, purely from a core banking perspective. The most interesting thing that’s happening is in China or greater China for us, right? Where you have Chinese Banks of Greater Chinese Banks were actually be an early adopter. So you have the legacy. But they also have 24/7. But the volumes that they hit on real-time payments are so high right?

Primarily because you have Black Friday or mobile payments is they have come up with the concept of now dual-core, right? So they have you can have the Legacy for banking engine for your normal banking transactions but your entire online and mobile payments actually is run on a micro service based. You know, core banking system, which is quite scalable on the cloud.

So effectively what happens is your,the transactions which require real real-time payments are completely running on the the smaller core, not the larger core, right? So that’s among the most interesting things that’s happening on our side especially in India and China. UK, of course, has had very great success in I would say faster payments, Europe is getting there in terms of say Pines instance. They’re still testing it out, but everybody still not 24/7, right? US. is not there, right? So I think emerging markets, which have taken the 24/7 for banking system are many able to exploit real-time payments. The rest of them are going through the Journey. That’s the way I would actually summarize.

Steps to minimise service disruptions and how to best recover fast

TRINA: Theo. So, in recent history, we’ve seen some pretty significant outages and some of the major Financial Services systems sometimes, they are even reported in social media before the operations teams themselves know that the systems are down.

Many of these outages have caused havoc and delays and have infuriated consumers and merchants. What steps should we be taking to minimize service disruptions and should they occur? And how best to recover fast from these?

THEO: Yeah, so go thank everybody. Sitting here think has dealt with the most simplest way, a lot for runs out on the database and brings their own bank, that dealt with. I with those ones last year, I came, I went down and I think for banks with all three of the large Banks been down at the same time. For, as I say, these things happen, even in the best of bad things, I would say today for me, this to do areas to look at the one is smart monitoring and dashboards to look at the rather prevented before it happened. The other one is the design of your production architecture.

In terms of the monitoring of sort of this sort of 12 into both both theories. In terms of monitoring. As I said, most of the companies here, I think is Blanco, New Relic or any similar application but also I think what we’ve seen and what we advocating as well as to add sort of AI apps and technology that actually lists self-learn your environment and actually bring up more scenarios and sort of self feeling of your systems and platforms as well. And I think those things have gone a long way that we’ve seen implement with our customers to actually prevent these incidents happening.

The other one that we do at Key design feature in, is we call it a circuit breaker design in terms of your production architecture.

What that means is that when you look at the components of your production stack, is that if one component starts filing it disconnects for the circuit breaker trips in, which means that, although one component is down, the whole bank, large part of the bankers to operating is not bringing the whole Bank down. And I think, what we’ve also lightly advocating our customers is to move to the cloud nine of platforms, especially is not said multi-cloud environments because that by itself provides more resilience in terms of your deployment. For example, if you look at your Cloud deployment architecture, it provides a sort of automatic load balancing in terms of a multi-cloud approach, it allows you elastic scaling of your kubernetes clusters as well. And if you used instead of two, service Mason you can easily in real time actually move production now. So we’re not even talking about restoration time. right? In today’s world, we don’t need down time. So as I said before, they need technologies in terms of cloud available, you can really minimize your down time, if you deploy properly and the cloud architecture is all set for our for from outside, as well as the city’s one of the key features that we draw the customers to adopt Cloud deployments as well.

Cloud based core banking solutions

TRINA: So generally speaking Australia’s FSI’s have been a slow adopter of cloud, so good segue. After your stale, some organizations are years ahead of others but many have a lot more to do to capitalize on the benefits of cloud moving towards the cloud or building, for the cloud, seems to be gaining popularity.

What are your thoughts on migrating to the cloud or building or buying systems design for the cloud?

CHRIS: So, the first thing I would say is cloud. Absolutely has to be in your strategy, and IT mean, when I first started working at CBA, they had their own mailmen men inside the organization. They’ve given up the tea Ladies by that point, but but they had their own mail me. Now, you have a career, everything else. So running your own, IT running own data centers, make sense when nobody else was doing it, one of our, one of our banking customers, we went to the U.S. to visit Fun of the hyper scalars and that hyperscale had more people involved in security than that bank and I had in IT. So anybody who suggest you that are? Well, maybe it’s not as secure as what we run ourselves. That’s that’s wrong. So there’s so many of these examples and we if I look forget about the big end of town, we’ve got, we’ve got three customers in Australia, running Cloud for banking product that are all hosted in the cloud but they don’t even know where it’s hips. They don’t need to know. They just want a banking application that works. They don’t need to know all the other pieces.

They’ll tell you how often it needs to be running. And when it’s allowed to be down and when it’s not allowed to be down and that’s all they need to know about the technology because they are Bank, not a technology company and I think with anything, if you can specialize in, what you do best and get somebody who’s better at that, then I think that’s the ideal solution. So, Always look for somebody, who’s better at doing those things? And you are and it’s not without his pain. We’re working with one of our larger customers and just trying to figure out how to get the data out of their Data Center and into the cloud over a short shutdown window will be challenging, but it’s got to be done. That’s what I would say.

ERIC: I would concur as well. I would also say there’s a methodology to get there as well, right? And I usually do tell people don’t start with core banking right there. And well all banks have a lot of different types of applications in their ecosystem and if you’re newer to the cloud of most banks do have strategies these days but many of them have not implemented a lot of that strategy yet. So do not start with your core banking system By the way, let’s look at the five or six hundred different systems that surround that core banking system or the ancillary systems beyond that start with that, learn from that, get used to the environment because it is a fundamentally a different environment there, they’re used to today, make that core banking system may be middle or end of that journey because I think there’s also something I have to think about.

We have to be able to scale and what I haven’t seen yet is a full-blown Tier 1 banking system running in the cloud that supports 100 million plus accounts right, I know it’s possible.

I know it’s we’re going to get there but it’s not the first thing you do out of the gate. So again completely agree, got to have a cloud strategy you got to get there but find your way there slowly make the steps you need to take to take the applications that aren’t super critical. Get them, they are get used to it, get your IT staff understanding, who they call, who their contacts are what the security measures are around that and then start looking at your core banking system so the methodology is just as important as the as the strategy to get there.

CHRIS: Yeah. And on that one of our customers did move while they had targets to move by servers and they end up moving all the easy things which is make sense, but then 50% of the remaining servers was the core banking system so, but they did that as well. So yes, make sense.

ADRIAN: Can I have a minute on the cloud? All right, I think we’ve Cloud so I work for FAS and my, my baby is to bring our Cloud native software as a service Cloud solution deployed on the public Cloud to Market. I think the appetite is there to do that? I totally agree with the comments around starting small, I think a lot of banks over the last 10 years of put a lot of those ancillary systems, I used to work for salesforce as well. And you know, a lot of banks move to Salesforce five six seven years ago to put on the cloud. I beliesegreve banks are ready to move to the cloud.

I think Chris made the point Banks want to focus on banking. They don’t want to focus on technology when we’re talking to Banks. If the first thing they ask is what’s under the hood and how that works. frankly. It’s the wrong Bank to be talking to about moving to cloud and to my earlier point around It it’s finding the banks that actually want to move. There are a lot of banks out there that want to move to cloud and the appetite is there was seeing that globally agree with Eric’s point, maybe not moving 100 million Accounts at this moment in time, but a large number of banks are moving significant volumes to the cloud and we will see that over the next two to three years that you will see Banks running 10, 20, 30 40 million accounts on the cloud.

JOHN: My questions about cloud and running multi-cloud with salesforce and your payment systems, and your core banking system sitting on multiple clouds. I mean, how do you think about running a reliable system across multiple vendors in Cloud providers?

ADRIAN: I think It’s around segregation of what those vendors are actually doing. I mean, if I, if I think of will use the sales force and the core example, delineation of the role of the solution say we will. But I’m not here to bash salesforce but for example, he sets off the CRM system reset customer master and what function should it be performing and how those functions begin working in with with the core. If you don’t look at the core is the core going to be the master of product is the girl going to be the master of customer, have our services are exposed out. I mean, these are things that you need to consider in the overall architecture. I think the role of the role of the corner and it’s fundamentally going to be the record, it’s fundamentally going to own the customer process, the product and pricing process, have a service is exposed out and then those services around it going to be deployed on different Cloud other than going to consume those. I think how we architect those together is is difficult. Don’t get me wrong, but I think fundamentally it’s around looking and deciding around the delineation of what process is where.

THEO: Just want to add to that. I think we talked in terms of multi-cloud it’s a reality of today, right? The that we’ve done, there’s hardly any deployments we doing which is not melted Cloud. We do integrate into multi service providers, external as well as internal sort of platform. That’s also deployed improper Cloud architecture. So, I think it is more the management tools. But also, how do you, how do you deal with latency and redundancy in a multi Cloud environment? So say there is a lot of benefits that it but it’s also not of Technology tenant challenges that it brings as well. That comes back to you. Proper Cloud architecture design as well. Nothing one of the things that we’ve learned as well is to make sure that your big cloud providers. Whichever you run on is all, get them around the table to actually make sure you actually build the eye by liability scalability. But also a robust system that actually can withstand anything that’s been thrown at us the other part is also your management site is how do you run you management toolset on the admit the end of the day you don’t want to run multi cloud operations you want a single a tool for no single level to actually run your cloud underneath it. You shouldn’t worry about what’s underneath it. I think that’s part of the and that is cloud design strategy, terms of management and operational tools to manage to make it successful. But for more from our perspective is that is standard run of that standard going forward is that you’re going to run multi-cloud architectures. 

How to secure their customers from the threats of Cyber attacks

Okay. Adrian’s George question for you guys, so that it is platform allows money to be transferred and near real time between customers at either the same or different banks. According to the Sydney Morning, Herald in 2019, Westpac confirmed. It detected misuse of the PID functionality, which resulted in the private details of almost 100,000 Australians being exposed in the context of banking system transformation. How do you advise your customers to secure their customers details from the threat of cyber attacks?

STUART: So firstly, let me start by saying that I’m a modest cyber expert. I remember reading that article and what struck me was the Westpac’s, press release at the time. So yes they phone numbers and names were released but they said no Bank details, no bank account numbers are being released. Which to me, is quite an interesting comic. So, for instance, on, and the reason why if anyone knows Jeremy Clarkson, he at one stage released, his bank account details in the UK, and basically dead anyone to be able to try to do anything to his bank account with the bank account details. Ironically one person managed to make a small 5.5 pounds, donation to a charity, through some mechanism, but having a bank account by Itself but it’s actually not that dangerous releasing your name and phone number. However he’s and in today’s world looking, I can sit here and talk about code reviews and getting black hats come in and making sure that you can’t do sequel injections but that’s just hygiene. You should be doing that. Anyway the biggest risk to banks these days are understanding your end-to-end process, employee fraud, and the number one is phishing attacks. Okay? So in that account, in that particular situation, their phone number and names have been released, so they’re open them up themselves up to phishing attacks. So that’s, that’s a big issue. Now, how do you stop that? Well, that’s difficult, but in this instance, in terms of the mining of the, the numbers and accounts, I’ll go back to the post is how did the credentials get out there managed to call that service. So either I don’t I don’t know what happened either. Someone got hold of credentials that are now able to connect and call that service to bring all that data down. Or there’s some inside employee fraud involved and then so how do you how do you manage that? It’s not a techie shoot, that’s a process issue. That’s the internal Staffing issue and in terms of fishing banks are really good at looking at an individual transaction, a one-off transaction.

My dad was on the phone to someone at random and said, I you’ve got a windows problem and we’ll fix it. Open up this thing and he had a look at the errors and they said just type in your credit card details and we’ll fix it for you. And while he’s on the phone, he’s mobile phone rang. It was the bank, the bank bringing my dad was on the phone to an Indian scammer to say that you’re on a phone to scan a hang up now. So banks are really good at when I know something’s happened, they know about something implementing something there in it. But in terms of the mining of that particular thing, if you understood the context of the transaction, why would someone human being falling at that API hundred thousand times that API goes with you call that before you call two transactions actually make the payment so they should have picked it up if they’re monitoring that they should have picked up that in the first place or if you understand the context what a customer is doing, you would have understood that something was wrong, that I’ll just finish up quickly. So, but the biggest issue these days is phishing is, and how do you stay one step ahead of the scammers and it’s not just any short circuit into in processes.

Product customisations

TRINA: Arun and Theo, Macquarie Bank Hold of measuring Drift from the core of the Catch Phrase That permeated across the organization in an attempt to prevent any system customization of the new platform when they were upgrading their core banking system. How important is out of the back box versus customization?

THEO: Look, I think it is. The most important thing, is to look at. Why, what’s the benefits of buying out of the box? Have you understand why you’re doing? It is also, this is lower TCO ensure you don’t paint yourself into a legacy corner again with a new platform and that you can sort of continuously upgrade and modernize things or people to work towards an evergreen type of approach will continuous releases and also pick up new functions and features as you go so that if those are the things It’s sort of you lock you in, as an out-of-the-box solution. Do you start customizing, firstly, increase your TCO and cost you lock yourself into Legacy right away. And I think, approach that we’ve now taken work sort of reference bank or model Bank as the ready you go. Option is we don’t actually ask the customers. Please tell us your requirements because that’s where customization start.

The second point that we’re doing is we also asked if you starting A new project actually bring the minimum amount of your legacy employees with us, because all they do is sell rebuilt. The Legacy product into the new product. So we actually say, give us a new team, a new bank team, minimum knowledge and let’s design the new bank in the new processes based on what’s available out of the box because out of the box and I think all of our collective platform provider, see if already built models that’s based on the best practices worldwide, all the standard products in the, actually ready for consumption and that’s what we actually started from the other two things that you get from it to stay out of the box and natural is fast implementation lower risk, lower DCA, and upgrade ability. And I think the thing is especially in today’s world, although course are fairly static. All the ancillary surrounded is moving so fast and I think if you stake here, do the core and open out of the box, it just set you up for the future. to really utilize all the new functions and features coming up. Moving forward, and I think from our side is, we’ve got a different approach to say. Please tell me why not, but don’t bring the Legacy into the into play. That’s all.

ARUN: I think Theo kind of summarized it. But probably I will make two three additional points see for us, we kind of try and differentiate between small Banks and large Banks. And historically, if you’ve seen small banks, have always challenged right. Customization. They’ve always accepted the as a system, its the big Banks who actually look at customization in terms of, you know, the differentiation of specific processes that they have excetera. So we take a slightly different view here and and the biggest challenge of customization or drift from the core is always a great ability, right? The challenge that you’re actually going to be left behind and I and that’s more of an engineering problem to solve, right for us. So we while we take the approach of, you know, trying to stick to the core but given the fact that, you know, you operate globally, right?

As a global vendor when you operate, you will have market levels customizations of client level customization. So it’s actually, you have to build your product for it. We can’t actually, I would say build the product to be a standard globally in other way, we have to build the product for customization, right? And that’s where we take a view that how good is our extensibility toolkit, right? And how good is our output is our upgrade ability to make it, right? And and the drift from the core has to be managed from being able to upgrade. So we should allow the drift to happen. And it’s possibly a view that we take in terms of product design.

What does it mean to be a Digital bank

TRINA: Stuart, I’ve got your last question here. So in December 1995, advanced bank card by Saint George paved the way to provide customers with 24 by 7 banking with the rollout of the C++ internet banking program which was downloaded by 350 customers in the first month, 12 years later in 2007, Telstra launched. Australia’s first consumer smart phone, the Nokia 925 that said, the term digital didn’t gain any popularity until about five years later many wondered then what digital meant, considering we hadn’t been analog in a long time. What does being a digital bank mean to you?

STUART: Okay, so firstly digitals, probably, I hate teaching of the word digital, it’s overused and used for everything and anything. If I go back to your example, then you talk about Nokia in 2007 and five years, so wasn’t 2012. So back then, digital product meant a funky new app, being a banking app. So digital back there 2012 meant that you could build a banking up.

Fast forward a few years from their digital, probably expanded to include elements of social media but if I didn’t step back and go, well, if I take all the tech out of it, what does usual mean? It’s round providing a integration better customer experience, so let’s just take, take out of the conversation, it’s about, so that’s back in 2012. A banking app still, providing a better customer experience. Now, people will throw around machine, learning, Ai and data and that’s what that’s some of the technical blocks required to get a better customer experience but it’s in what is a better customer experience today and I’ll give you a couple of examples from our life and then to paint picture. So we all know some simple ones you go and if you’re a Willy’s member and you go and tap your rewards card and you’ve got your app that every week or month, it’ll tell you aw Stuart you like ginger beer, ginger beer is on special go and buy it so they know what I buy. There you go. Go and go and buy this.

If I go into Google and googling sneakers. Next time, I go into some other website to be an ad on the side fix naked. So the those channels are really good at that, kind of targeted marketing. But then it starts to get better so, 12 months ago, my wife bought a new car and it’s the first time we’ve had a card at this connected to the internet.

Yeah, so voice-enabled you go press the button. Go call mum. Yeah. And the Rings automatic fantastic or navigate home whatever and a map comes up. That’s fantastic. And the scary thing is we were just having a conversation talking, we didn’t have the map on or anything we’re just talking about a restaurant in cronulla and then later on we didn’t navigate music navigate to wherever you’re going and up on the right hand side where comes up to recent searches where you might go to it, had that restaurant there now we’ve never navigated there because we walk to it.

Yeah, we’ve never bought online from so just be careful the cars listing in or Google’s listing whatever and it’s it’s listening to what you’re talking about. Yeah that that is scary. Another example is recently I bought tickets to Chris Rock’s concert, he was out here the other week and I didn’t tell it was supposed to be a surprise.

Two days. Later, she starts telling she starts getting all of these, Chris Rock ads on Instagram feed. Now, I bought it on my mobile through my account, but she started getting all the Chris Rock Instagram feeds.

So, what so for me digital is around how Banks can take Data to provide better customer service further insights and Banks aren’t that good at it yet? They focus on the data they have. Yeah, and sometimes they’re good at just using the data that I’ve got, but they don’t look at what other data is out there. So digital is around, how you can better bring in other data sources, and bringing those insights provide, a better customer experience.

In situ upgrades

TRINA: So we understand the Commonwealth Bank has accomplished Has accomplished in six, you core banking system upgrades, how significant is that? And why, and what does it take to accomplish nearly a zero downtime effect.

CHRIS: Sure. So yes CommBank did upgrade it was about two years ago was the first upgrade they’ve done since the CBM project which were they don’t upgrade in the early days, it’s when you’re upgrading cba’s core banking system it’s significant. So you need to tell some of the retailers. So for example, Bunnings if you turn up Bunnings because the official time was was coming back on a 7 a.m. on a Saturday morning, and if you turn up a Bunnings with your debit card and you buy something more than whatever the standard amount which, which about, $300, there’s going to be an issue so it’s not, it’s not without its nationwide impacts upgrading the system, but also there’s a capability.

So maybe we’re a German software companies, have my German friends weren’t allowed me to say zero downtime. It’s apparently near zero downtime because They’re not American sorry.

They don’t sort of stretch things. Sorry. Eric, but but the way the architecture Works in this, it’s quite smart, they they can actually create a whole new instance beside it. You you then move all the data that doesn’t change all that rapidly, you’re starting to build a completely upgraded system. While at the same time, the production system is beside it and then you just have the few tables that are constantly Changing and then you go off a little bit and you bring them back and hopefully that card works before Bunnings opens in the morning and it did. So yeah not without its challenges but the architecture allows that to happen.

TRINA: know I was still at CBA when they did that. And yeah it was a mammoth effort and very successful.

CHRIS: just I mean the volume is 1400 transactions per second 24 hours a day, 7 days a week. So you know where to take it off for a while because there’s actually a point where you can never catch up.

Data Migrations

TRINA: Theo data migrations probably represent the toughest and highest risk part of any major transformation or core banking upgrade. It’s even tougher when there is a merger or acquisition and one organization has to absorb the other customer transaction at the application data from the other. We hear the term Big Bang versus phase migration. What advise would you give when it comes to planning and executing a major migration?

THEO: I think we could sit here all night and talk about data migration because it said there’s no Bank product that hasn’t been counted, all the intricacies and like late nights and sweets going with data migration because I think the key thing that we found is that start early, you kick it off as when you kick your project off, it is one of the most critical streams and I think what we’ve found is got a large bunch of customers is treated data, migration as a secondary option is happening in the background.pool banking platform is ready. We’ll think about migration. So one of the things is start early, give it the focus. I think the other thing that we do find is to make sure that you’ve got it out of migration team. That’s its goal at been around for a number of years at that the right methodology to the right tools tool sets to use until said, we’ve recently done major mergers, doing three banks as well. And I think the tool sets are you using was definitely augmented by also AI driven tools to help with matching  enough data and transformation of data over which is made a massive difference in terms of speed how quickly we could do it and I think the other part that can also say, start your dress rehearsals early in the game, don’t wait till the end, start running it as soon as you can filter out. What’s going wrong and run it again and again. So these are some of the lessons we’ve learned. I think, in terms of approach, there’s always a debate you say, whether it’s Big Ben with its progressive what approach? And I think there’s no one right strategy that fits everything, so much dependent on what you’re dealing with what’s the nature of the solutions or platforms that you migrate from technology business processes that are going to come on. And that’s my says, you can’t say it depends on the specific circumstances that you dealing with whether it’s a big bang and I don’t like to use the word on what we call it bulk migrations then big banks because if it bang, it’s already gone bad. So it will be cool, that’s about 12 migrations, but as it recent huge merger that we’ve done.

It’s a merger with large three, large bank will sit and three different core banking systems consolidating into one, which we completed in 12 months, but the gain is our said the use of the smart tools and methodologies has made a huge difference. So said we were able basically, in the course of two months, we do small Banks. If you want to bangs, if we want to call that, as migrated over 250 million account from 11,000 branches and over 100 staff that we migrated A demotion to one entity will see successfully in that small bumps the city. It can be done, right? but again is also here for sizes. All right, team, right, tools, and methodologies and start early so don’t wait till they start with only advice I can say.

Is Banking as a Service the future of banking

TRINA: Adrian, I’ve got another question for you.

So acquiring a license imposes not only significant capital requirements but more importantly compliance with strict regulations on money, laundering and deposit protection to name a few, some of reverted to banking as a service solution. We recently had some success stories from this front. Some are already offering this as an option is this the future of banking. And if so, what does this mean to modernize your technology?

ADRIAN: I’m going to do it. Very typical Australian guy yeah I know it’s not necessarily the future of banking but they could be I look after asia-pacific and I think a lot of the countries in a pack and moving towards banking service, it’s just two sides to the coin. I mean, first of all, it’s does Banks want to look at different channels for how they get their customers to access so they’re going to form relationships with vintage,or with telco so over three times and we’re going to look to provision Banking and in a different way and so that would by definition be banking service.

The other side of the coin is whether it be social media or retailers, or or telcos, same list by want to get into banking. So, how do I provision banking services, how do they offer additional services? So yeah, is it going to happen? Absolutely, I think from a technical Technology perspective, the bank’s challenge is and I know a particular Bank that run for a cause right, and I won’t wanna call for their core one, call for their digital and they run one call for a well-lit and and one call for a corporate entity, that’s not sustainable moving forward. So if you don’t can do banking as a service and you have to then look at new architecture so you have to look at multi, tenant based solutions, you have to look at multi multiple entities, entities running on unknown solution so as an organization, you can set your hierarchy, you can understand how all of your different parts of the business of running whether they be you or whether they be a partner and then you are able to actually understand and and differentiate and segment, the kind of products and services to do so I think as you move towards banking as a service in that multi-tenant, multi entity based technologies can enable you to do that.

What is the importance of the right implementation partner

TRINA: Right answer. Is that true or are you just really paranoid it’s yours? Excellent.

Arun, One of the most significant considerations when you contemplate a core banking operator, or modernization is the implementation team. What must you look for when choosing an implementation partner and what difference, differentiates a client from a true partner which shared risk to an order giver?

ARUN: Probably, my answer will be little biased because TCS has its own implementation. Does its own implementations, right? So, but nevertheless I’ll give you the answer in two parts, right? The first part is traditionally, what do you look for write in terms of implementation? and second part is currently, where do we see the challenges of what is it that we actually say for the next generation of core banking that all of us have been speaking about?

What is the challenges that we envisage and need to? Ready for see the current view is of course, the traditional approach, right? In terms of do you have a solid core team right core team in terms of program management solution architecture, integration specialist, change specialist all that.

What’s the core team and what is their pedigree in the sense? Have they actually done it before you? That is the most important thing. Have they done it before?  Both sides, the bank and us that is number one, right?

Number two is do we treat it as a organizational change management program, it’s just not a court. Banking program is it a change management program beat in terms of communication training, you know, rollouts Etc, that is number two, number three, I think John mentioned it, it’s about MVP, right? Where is the MVP, how fast can you get it to test? How fast can you get it to feel? I think that is the most important thing that is a radically different view. You know, that has really emerged over the last 34 years and the fourth thing that we really look for in partners. Because as you operate globally history, local regulations and local know-how.

The it’s not we don’t have the knowledge every country, where, where we have scale, we have it. Otherwise, we look for partners who can actually help us in this, right? These are the four traditional ways for looking, you know, for the core banking programs but there are two New Dimensions which really keep us awake. I would say. Right.

First is, I think like, Stuart mentioned As you move into the microservices world. I am going to give you a set of legal blocks, it’s not going to be one big core banking engine write a set of components or whatever it is, but it’s going to be a set of legal blocks you do. We have to figure out. How do you actually orchestrate them, compose them, you know, how does it actually work in the overall ecosystem?

That is going to be a whole different ball game now as you enter into the microservices world, right? And I think there’s a lot of thinking to be done on that.

We have really not thought through how microservices actually would get implemented. What’s the best way for it, right? And the second area where we, let’s be very honest. I think there’s a lot of expertise that is required, but I think all of us are falling short is the cloud expertise, right? In terms of when you roll it out, obviously, almost everybody is choosing one native platform, meet AWS or Azure or gcp. How what is your Nativity special? What what, what is the implementation expertise you have that. So there is a traditional View and in the new world Cloud expertise as well as microservices rollout is probably the two additional actions are going to add right.

Biometric recognition and digital identification

TRINA: Eric, If you visit a local bank branch and attempt, any type of inquiry request customer service or attempt to transact regardless of the fact, you might be an existing client, you need to identify yourself using your driver’s license or something similar if you apply for a new product and you’re a new client, you probably need to do a hundred point check. We’re seeing MasterCard leading the way in biometric recognition and digital identification. These are some examples of what the future holds. What should we expect to see in the future of banking solutions?

ERIC: So when when I fly back to the us tomorrow I’m going to walk through immigration to a machine. I’m gonna look at it, it’s going to fill me a sheet of paper. I’m going to walk out that’s it, right? So if I can get into my country with a machine, I should be able to walk into a bank and be recognized on that same instance, I spent about 10 years in the automotive industry and we had this theory as BMW.

We had this Theory when somebody pulls into a store for servicing and whatever that we should have enough technology within the car and within that store to know who I was when I walked out of that that car. Mr. Burton thank you for bringing your BMW and what do you need help with today? Or thank you for being your BMW cars. Already called us. We know what you’re here to do, right. I think banks need to do better at this, right? I think they need to understand the customer better and not just my digital footprint, but what is it? I’m doing online. It’s not like, it’s like a little bit of a different take on this, right?

So when my son was born, seven years ago, you know, I was on Amazon, he’s to buy movies play video. Games, whatever I ordered diapers and wipes the first time and about 30 seconds later. Amazon sent me an email saying, will deliver those to your door every 30 days there’s a 15% discount.

I just could not click fast enough on that offer, right? My bank had no clue. I had a life change going, right? So it’s not just the, when I walk into a branch or I’m online, it’s understanding me as a person and the, and the life events and I’m going through, it wouldn’t freak me out of my car. I wanted to drive me. So if I do, I’d like it to driving to the restaurant to buy, like so,I think there’s a huge opportunity for a digital footprint to be created and I’m choosing to work with my bank so you know if you ask me, is it okay to store my data? Sure, but I’m okay with that. So I think that that should be a goal for us in the next 10 years at how do we get better at? Recognizing, not only my digital presence, my online presence, but also me as a person, what’s going on my life and how the bank actually impacts me in those in those positions, I think it’s a big challenge for all of us.

CHRIS: and Trina can I just add it and it is a U.S. example, Oh, Uber were held up wanting new drivers. They couldn’t onboard drivers faster because the drivers didn’t have a bank account and they had to go then line up in the branch and it was just taken too long.

So Uber added a basically an account origination into the onboarding process for a driver and overnight they became the largest acquire of small medium enterprises accounts in America.

Now, it’s one thing that the banks are just kind of not up to the point where others are, but if, if the if other companies can’t get banking done fast enough then they’ll find another way.

And so it’s a threat and it wasn’t that overwhelmed. We had these Banks were really going to screw them. They just went, we’ve got a business model and you’re in our way. So I would say everybody’s got to be doing as much with technology as they can and if I’m a bank, I need to be giving my customers the opportunity to do banking because they’re trying to do something else. And that’s so when they’re searching for a washing machine, the financing is there. But we’re not there yet.  

ERIC: and why do I have to fill out a form? Every time I want to get that financing, everybody knows who I am, right? It’s I want to get that wash machine here at fill out these 20, these 20 fields, why it did boggles my mind that that that is not been automated yet to especially if I’m working with my bank on that right? buy now pay later, right? That should be something we should be for them. I’m not a big fan of the product myself, to be honest with you. But the the application of how we do that in daily life, I still is missing so much little detail and how we can just expedite that process. In Florida. I think it’s a big challenge for us. I also think you know, Banks, you guys have some the most unstructured data bases in the world, you have great data if we could figure out how to harness it, right? And you know, if I look at data, warehouses data Lakes. Now that exist within Banks, it’s a treasure Trove of data that we have no ability to actually use. And I think if we can get to that point where we can the digital identity and you know all that history about me, think about what we could really do with that. I think it’s I think it’s just a treasure trove. I really do.

THEO: If I can just add in terms of everything. I think the key thing is embedded, banking brought this to have banking at the point of where you want to do something and I think one of the key approaches that we’ve taken is to move away from just custom interface or ux design to actually human centric design, which we actually step back and actually look at the human as an individual and is live stage journey.What is he actually doing? It comes back to you, I think that’s didn’t Eric says to understand ways in his life stage.

How does he interact and what does he do? And actually, they appropriately interact with The other things that we’ve also looking at and we doing a lot of advanced work in it, he’s to actually use sentient AI driving a lot of the interactions either via voice or sort of automated actions as well that actually can understand let’s pull it. EQ, smart, AI in the background that actually understands what the person is doing, how he’s feeling or anticipating right sourcing because I think if we look at digital, as I said, there’s so many things are What is it big thing? That’s going to change it? Smarter UI smarter ux, better Journeys.

I think we exhausted all of those. I think we’ve fairly mature where we are in terms of UI ux design. I think the next thing is this to sites that we looking at this first sent in a are supporting, your the end user in terms of driving at whatever means it is and I think the other one is also smart assistance for the bank staff as well, because I think what we have seen is the lot of new automation, or automatic robotic or automation is actually to get the human out of the process.

What we found is that if you step back in banking years and years ago, why was banking good because you could talk to a human, it interact like a human. So what we need to do is to bring in that interaction back into how you deal with your customer but also super empower your staff to actually providing more value added engagements with your customers and I think in something thinks needs to change, Banks got all the technology, they’ve got this pain and it It’s time to sort of move into the next phase in terms of sorry, human-centered design, and new customer interaction.

Banking future in blockchain or other

QUESTION FROM THE AUDIENCE:

I think this was asked to some extent but if there’s a crystal ball to predict where Banks would be ten years from now, is there a view? And that’s probably first part of the question and how Technologies like blockchain can sort of accentuate that transition?

THEO: I think banks will become more. How do you call it integrated into our lives, right? So said, I don’t think the, what we can see in terms of technology and where things are going as well, in terms of human interaction as well, it will become more part of your life. I think banks will definitely step up and actually start using social media or social data that’s available and actually blend them. Blend it with a transactional data. So I think things will become more intuitive, it will become more part of your life and is or said, even if you look at things like the metaverse and augmented reality, those things are coming to light as we speak, right?

Brain human interface where you can order use dark glasses or just put a device on it. It actually interact directly with with your invoice. I think these are things coming but it isn’t just not the technology is always going to make our life easier and improve life going forward. In terms of blockchain, it is a technology is got a place to use. Will it revolutionize everything? No it was not but it’s got a place where with actually absolutely makes sense but I think it’s more customer engagement and how we interact is going to change a few show of banking. This is my my personal view.

ADRIAN: I might be slightly controversial banking is always going to be exist, Banks, may not. I think in terms of the ecosystem of of banks that we have now and the numbers of banks, that will definitely shrink banking as a commodity or grow, the stronger banks will survive. The we more MMA banking wall come a commoditized service that will be offered, not just through banks, but through lots of different organizations. It’s not going to happen overnight banking is something everybody needs, but if you ask a customer to they need a bank that the answer is probably, no, they need banking, but they don’t necessarily need a bank.

And I think that’s where all of the banks need to realize, Eric talked earlier about harvesting data understanding Our customers, there are lots better organizations in the world that do that rather than Banks.

And so as Banks, wake up to that and how they provide those services, I think you will see a consolidation of Banks and the number, the number of decreasing quite significantly over the next 10 to 20 years.

STUART: I tend to agree with that. I also think and to this point he was about embedding banking. It’ll be more about. You know, whilst I’m doing the shopping, it’ll be, you know you’ll drop your bananas and it’s in the top in the trolley and it’ll just get scan you and pay. So you don’t really think about going in to pay. You pay your bills, but I do think from retail banking, they’ll be still will still want a banking app and still and I look at the other end of corporate CE and I are still going to be well for corporate institution to log in and do liquidity management and trade finance and all that special. But in the middle, I think that’s where the smes parking spaces where it’s going to be completely changed, banks will no one will log into a bank. If you’re an SME, you log into your zero, your a to b  that’s where you raise your invoices, they’ll do it. You’ll do all your banking through your a to b and that’s where you don’t even know you’ve got a bank because If I flip through 0 in my be I can move money from A to B. I don’t need to do with my So, I think it was quite interesting when Ian said we’re going to buy, and I had a chat with David about this. I thought that was one of the most inspired moves that the bank and made him long time, and then, two days later, it was called off. But anyway, but I definitely see the SME space Banks. You go five years from now. No, no SMEs log into the big Banks to do the banking.

ARUN: Maybe, you know, I had an observation. I spend a lot of time in Switzerland building banking systems, one of the key things, you know, how the Swiss banks behave is they tried to drive all the traditional transactions online but to keep the branches for advisory services, right? And and that is where they track your life life cycle, right? In a sense, they see how you actually move from a typical retail customer to a high net-worth customer.

They don’t want to actually lose you as a high net-worth customer by just, you know, focusing on retail banking. So I think and that’s a trend we are also seeing in India.

We are seeing branches, retail branch is closing down, but we are seeing advisory branches opening up, right? So there is most of the retail is moving online on the digital world.

Most of the advice is actually more high, touch more, branch oriented, right? So branch is actually not dead in In a sense, at least we are not seeing that still branch. So there is a transmission of banking into Wealth Management in some sense, right? And that’s that’s one of the key things that from our perspective.

Core Banking Solutions event finale

TRINA: Excellent. Thank you. And some great insights there into the future of banking and I think on that note, that’s a good way to wrap up the questions. John has one question. He’s, it’s a statement, okay, yes, you can.

JOHN: Y’all I’ll keep it down. I’m trying to. Yeah. Thank you.

Arun, thank you for coming from from India for this. I really appreciate it.

I did a lot of work with financial Network Services, before it was acquired by TCS, I’ve actually done a bit of coding on banks. So, thank you for coming out here. Thank you. And there’s some great names out there.

 I want to add another color. Dean is in the room. He was 30 years ago, working with me and a few others. So excellent.

Theo, thank you very much. I spilled a lot of blood with Infosys on the CSH program. Okay. So again, thank you for doing this wonderful.

Chris, Macquarie Bank was like Stephen paynter said those? If that name means anything to anyone, another great called bank program stay with you forever again of Quarry Bank was a wonderful program. Thank you for being here today.

Do you know if he was in 2000? when, should I say names?

It’s public knowledge anyway our terminals, Rams Home Loans before he was belong to West back in a worked on that project and then Adrian, and I worked on moving the rams onto Unisys uses. Credit Services was formed. It was 20 years ago.

So thank you for being here today, wonderful.

Stuart, what can I say? I can talk three hours about you but your work on integration at CommBank, CBM, spectacular and payments as well. Congratulations.

I’ve done so much work with EDS, I’ve been working with you but thank you so much for being out here from the US. There you go, core banking programs are very very very hard. Okay. They are possible and they can be successful, but for them to be successful, you need to have great leaders.

I couldn’t think of a great leader right now in this industry than Trina Queenland, who’s doing a. I’m saying that with a straight face. Okay. And I’m saying this in the presence of royalty like Angela favor over there, who’s done so many core banking programs. Again, I don’t want to be disrespectful to anyone in the room but she’s fantastic and she’s at the moment she’s leading a major piece out the ASX and not only is a great presenter but she’s a wonderful leader.

Thank you Trina. Thank you.

TRINA: Thank you. All. Thank you panel. That was an excellent conversation and I think I learned personally. I learned a lot from that. I think the questions are great. John really, really insightful and the answers were excellent. And now I think I’m handing back to Alana or are we? We’re wrapping up. Excellent.

ALANA: Thanks Trina. Thanks everyone for coming. Thank you to the panel. We are hosting another event in November core Banking and it is

The disruptive. So we look forward to having you there. Then please join us for a glass of wine or a beverage and some canapés outside. Thank you for coming. Thank you, John for hosting. See you for a drink.

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