18 September 2012
Oracle FSS has officially launched its new core banking system, now dubbed the Oracle Banking Platform (OBP). First reported in IBS earlier this year and with a working name of the New Generation Banking System (IBS, March 2012, Oracle prepares New Generation Banking System), the supplier is claiming a first live site. This is UBank, the start-up entity of NAB in Australia. Another Australian bank, Suncorp, is also involved. The system is based on Java and Oracle Fusion, is intended to complement the supplier’s long-standing universal banking flagship, Flexcube, and is particularly aimed at tier one banks.
The development started around three years ago, says Ashwin Goyal, SVP, financial services at Oracle FSS. There were a few drivers. First, Oracle felt there was pent up demand at the top end of the market, with banks wanting to bring about a transformation and phased replacement of their inflexible, costly legacy systems. Those systems had been built when ‘banking was easy’, with a limited product set and largely branch delivery. Today’s market is much more driven by the customer, in terms of when they bank, where they bank and what kinds of products they take.
The most likely replacement route is expected to be through components, bringing a ‘progressive transformation’. Such componentisation was now felt to be possible but needed a ‘ground-up’ approach to produce components that were genuinely loosely coupled. Goyal believes this will be an area where Oracle will have a clear advantage with OBP. The system uses the Oracle technical footprint and middleware as well as harnessing application components, for CRM (Siebel, now Oracle CRM on Demand), data management, risk management (Oracle Financial Services Analytical Applications, which incorporates a range of solutions, including the I-flex Solutions-derived Reveleus), and financial management (Oracle’s Financial Accounting Hub, which is effectively a thick sub-ledger). However, he emphasises that OBP is a brand new development, with no reuse of Flexcube code. UBank is not running on any Flexcube components, he states.
Another driver was Oracle’s aim to move into the mission-critical arena, so working at the board level with the CEO as well as in its traditional technical domain of the CIO. Goyal rejects the suggestion that the decision to build OBP stems from any disappointment at Oracle around the inability to move with Flexcube into larger banks, gain a broader footprint and penetrate North America, as was planned at the time of the acquisition of I-flex Solutions (IBS, August 2007, I-flex and Oracle aim for ‘out-of-the-box’ banking). ‘The drivers for OBP were not so much unfulfillment of our original plan or any kind of drawback in what we had.’ It took the best learnings from Flexcube, Oracle’s application portfolio and Oracle’s technical portfolio. ‘Fundamentally, we believe none of our competitors are solving like this.’
It was felt important to have a couple of ‘charter customers’ so that Oracle was not sitting in an ‘ivory tower’, developing a system and then bringing it to market to see the reaction. NAB has been involved for the last three years and Suncorp more recently. Both were initially touted as taking Flexcube (IBS, December 2009, Flexcube R10 gains breakthrough live sites; IBS, January 2012, Suncorp to replace CSC Hogan with Flexcube) and, indeed, were reported to IBS by Oracle FSS as Flexcube recruits for the IBS Sales League Table. When Goyal says there has been some ‘misinformation’ about these clients, it is easy to see where this has come from. However, UBank, which launched in August, now has around 300,000 customers and is ‘100 per cent on OBP’. ‘NAB has laid the foundation for the rest of the bank,’ he says. It has mostly in-house systems and has plans to bring its core domestic business onto the new platform. This is why it took OBP for UBank, rather than Flexcube.
Suncorp is looking at replacing a heavily customised version of the mainframe-based Hogan system, which now resides with CSC. It has completed a first phase centred on providing a new CRM system for all business users (so using what was Siebel) and has started on phase two, which will be OBP to replace Hogan. The bank’s project is touted as a ‘bank simplification programme’
There are no other customers at present but a strong pipeline, says Goyal. Initial focus has been Australasia and North America and Oracle is ‘seeing traction’.
There has been significant work to build the banking business processes including core aspects such as managing the way products are manufactured and priced, limits and collateral management to a customer level, and CRM. There has also been work to ensure that those processes are ‘end-to-end’, from targeting a customer to fulfillment and servicing, including across the non-OBP Oracle components. And there has been work at the middleware level, including making changes to Oracle Fusion to ensure it meets the needs of a banking platform, in areas such as Service Oriented Architecture (SOA), BPEL, security, the development framework and optimising the hardware.
For purely the banking application portion, there has been a team of up to 500 engineers, mostly drawn from the Flexcube team. There has been no reuse of Flexcube apart from some limited functional designs for generic banking tasks, says Goyal. Fundamentally, Flexcube is an integrated, ‘bank-in-a-box’ solution, rather than the loose components of OBP, he says. And in Flexcube much of the business logic is in the database layer as opposed to OBP, where it is all in the channel and middleware layers.
Flexcube and OBP solve problems for very different types of needs so are very complementary, says Goyal. ‘We are expanding the pie we are going after.’ The company will continue to invest in Flexcube, he says. Despite diverting considerable Flexcube resources to the development of OBP, the existing system appears to have taken something of a leap forward of late with Release 12 (IBS, May 2012, Oracle FSS announces Release 12 of Flexcube). For ‘pure play’ commercial banking and universal banking, Flexcube will be the route forward, he says, and it also has the benefit of having been tailored for 125 or so countries. For commercial banking, Oracle FSS’s stand-out deal for Flexcube this year has been the multi-site win at Wells Fargo (IBS, July 2012, Wells Fargo takes Flexcube for global business). ‘For the vast majority – for almost all deals we will encounter – it will be very clear to us upfront whether to lead with OBP or Flexcube.’ For the few where it is not, there is a standard internal process being put in place to allow the company to make the right call.
The first release of OBP is primarily retail in focus, for deposits and lending. There is a new origination front-end which can also sit in front of third party systems. Generally, Oracle has started with simple retail products and will extend into more complex ones, says Goyal, turning to SME banking and moving on from there. Each iteration will also deepen the existing business components, he says. There is support for self-service (web, mobile etc), branch, call centre and third party channels. UBank is mainly focused on direct channels but Suncorp’s roll-out will include the branch, as will that of NAB. With payments, ‘the way we have designed it is we are expecting banks to have some sort of enterprise payments hub that we would interface to.’
OBP is also touted as customer-centric and with industrialised processes. They have been defined, built and documented in a process library and this is likely to be the starting point for projects, he feels. Taking mortgage processing, for instance, from 45 steps to three is where a lot of benefits will come, not from a straight replacement of the existing system and processes.
As with Oracle’s overall policy, there will be a role for partners with OBP. ‘It is 100 per cent aligned with how Oracle brings all its applications to market,’ not least because of the expected size and scope of the transformation programmes. ‘It is very partner-friendly because it is all standards-based.’ It is written in Java with Java-based extensibility, including with Oracle’s JDeveloper and Eclipse, and there will be a strong emphasis on retaining a standard version with minimal customisation. Three system integrators have been in talks with Oracle and have started to invest resources, says Goyal. These are Accenture, Capgemini and IBM. Benchmarks are at the planning stage, with the expectation that the results will be announced in early 2013.
The work has been challenging, says Goyal, but Oracle is more or less where it wanted to be when it set out on the development three years ago. At the same time, it is known that NAB’s overall project has gone over budget and is behind schedule.