NAB promises action on core banking overhaul

National Australia Bank executive Lisa Gray has created a new set of targets for the bank's delayed core banking replacement, promising to deliver the remaining work at a rapid pace over the next two to three years.

Lisa Gray, group executive for enterprise services and transformation, NAB.

Self-described as an ‘eternal optimist’, Gray was charged with leading NAB’s enterprise services and transformation division in a swap with Gavin Slater in mid-2013.

She now inherits a team of 10,000 staff — over 40 percent of the bank's total workforce — and the business end of a multi-billion dollar technology transformation.

Gray provided an update on the roadmap yesterday after spending six months evaluating her portfolio and appointing David Boyle as the bank's new CIO.

She inherits a technology transformation that should have already been completed, but is barely halfway through.

NAB is replacing everything from its data centres, networks, call centres, desktops, voice systems, credit and general ledger systems, mobile apps and online banking sites right through to the heart of its operations — its core deposit, lending and transactional banking system.

“It is the largest and most comprehensive transformation agenda of all the major banks, certainly in this country,” Gray said.

Competitors Commonwealth Bank, Westpac and ANZ are at various stages of their own journeys. Early this year the Commonwealth Bank declared its core banking system overhaul complete — giving it three to four years advantage over its rivals. 

Westpac announced it would consolidate onto St George’s Hogan core banking system in 2009 but has continually delayed the start of this project while it — like ANZ — focused its technology spend on the user experience of front-end applications.

Much of the groundwork for NAB’s transition has been set in place. Its new data centre is live and a select few applications have been migrated into it, its networks converged from eight down to one, its contact centres overhauled, and a version of its NextGen platform powering the ‘UBank’ online banking subsidiary running in parallel to its legacy NAB core.

Along the way, the project has been burdened by both scope creep and system dependencies that hadn’t been properly mapped. Executives last year conceded the five year project is more likely to stretch to ten years.

Gray said that most of the refresh to date had been on “systems that people can’t see” more so than those they can.

A new timeline 

Gray promised customers would see the benefits over the next two to three years.

"We have used uBank as a test bed for many things at a foundational level which we will use for NAB-branded products and services within three years.

“All new personal banking accounts will be opened on the NextGen platform by the end of 2014,” she said. “That is very significant milestone for us."

The bank will then port all new business products to the new platform.

Then finally, the largest and most challenging task — migrating customers from the existing NAB platform onto the Oracle-based NextGen platform.

This is likely to take another two to three years.

“I can’t give you a more exact timeframe at this stage,” she said. “We’re talking four million customers".

Behind the scenes, NAB has rationalised from 280 products or variations on products down to around 100, with more to come and “absolute minimal if not unmeasurable customer impact," she said. This will help ensure a less painful migration, she added.

“The migration is where you start to get the real benefits. It's where you get more cost reduction, a simplicity of customer experience, bringing new products to market faster, to respond to regulatory change much faster.

“We’ve heard some of the other banks say that you don’t need to do a core banking replacement, that it's just about putting wrappers around the front. There are three reasons why in the medium and long-term, that won't be sustainable.

“The first is, there is increasing regulatory change in wealth and banking. The more change you have to do, the more change to a multitude of systems you have behind the scenes. At some point in time that becomes too costly, you can't meet regulatory deadlines, or it becomes too complex and doesn't work.

“Second, as more customers deal with us in a digital way, data is transparent to customers. Customers won't tolerate complexity or not being to be able to see what they want because of your spaghetti of legacy systems.

“The third reason is most legacy back-end systems do not allow you to do real-time transactions. Corporates and individuals are demanding a real-time view multiple times a day. We have small business customers demanding it.

“All major banks will need to do core banking system replacements.”

Real-time payments

Gray said NAB will realise the benefits of real-time when regulators demand all the major banks trade in this manner.

“More and more the regulator and the environment is shifting such that others will have to do real-time — not just at the institutional end but for high-volume transactional systems," she said.

"There will be more regulatory pressure into this area, from the Reserve Bank on payments (for example). The advantage is if you have replaced your core or are well progressed in replacing your core, you’ll meet these needs faster with less cost and complexity.”