Big Four banks ride 'new wave' of systems overhaul

Technology purchases in banking usually are expected to benefit customers, promote risk management or improve transactional efficiency.

Past investment strategies centred on technology to facilitate delivery of financial services via branches and online.

More recently, procurement has been focused on regulatory compliance and risk management, particularly in the wake of the global credit crisis.

However, recent announcements by CBA and NAB to upgrade core banking systems signals a new wave –- indeed, the next wave -- of investment, according to Richard Helm, a partner at the Boston Consulting Group.

“Many banks are at the point of worrying what to do next,” Helm explained.

“A lot of the assumptions have changed from overnight batch processing to enabling electronic transactions.

“New players have recognised this and are providing technology that works in real-time and puts customers, rather than financial products, at the centre of [transaction] processing,” said Helm.

Ben Cukier, a partner with venture capitalist FTV, claims that ‘a whole new industry has cropped up’ to make these types of real-time, customer-centric changes possible for core banking systems that were built in the 1960s.

“Batch processing systems were not meant for 90 percent of what banks do now,” said Cukier.

“[As a result], other applications have been ‘cluged’ on top of current systems to make it look like you’re getting a real-time account balance.”

The reality, Cukier said, is that the balance may not take into account the latest transactions, because it is still not processing and updating them in real-time.

But online and mobile banking is likely to exert more pressure on banks to change.

“Big [R&D] investments by Infosys, Tata, SAP and Oracle mean they now have mature platforms, and so they are largely driving this new wave,” added Helm.