New core banking platform from Oracle

19 September 2012

Large banks are the target audience for Oracle’s new banking platform, especially those institutions in the west that are looking to replace outdated retail bank legacy systems or banks in emerging markets that are seeking to expand.

Oracle says its FlexCube core banking product will continue to be sold as a complementary product, most likely for smaller banks, while the new Oracle Banking Platform will provide a comprehensive suite of applications for large banks. Initially it will focus on improving the efficiency of core banking processes and loan decisioning using its service orientated architecture (SOA) platform to aid integration and straight through processing (STP). There is therefore scope for some potential duplication and overlap with the existing FlexCube i-flex product that Oracles brought many years ago, but the vendor says it will use the flexible new SOA platform to add future applications, such as customer service and internal enterprise-wide tools, in the coming months. Additionally, the different target markets should be a key differentiator.

Developed with National Australia Bank (NAB) over the last few years, the new Oracle Banking Platform actually grew out of a project started back in 2008 to introduce the i-flex core banking product to the bank but once it was realised that the functionality and, speed to market and flexibility wasn’t quite what they were looking enhancements were begun, which eventually lead to this new large-scale product. Customers of NAB's direct banking subsidiary UBank were the first to migrate on the new system this summer, so some real-world testing has been done before the full global launch. Whether other banks will see the new product as truly new, or more of an improvement remains to be seen.

News analysis
“Core modernisation is both a costly and complex undertaking for large banks,” says CEB TowerGroup research director, Bob Hunt. “As such, many banks continue to operate on legacy core systems developed in the 1980s. A significant number of large banks, however, have recently undertaken core modernisation efforts to meet customer demands or improve operating efficiency.” The consequences in terms of IT failures and a lack of resiliency if you do not update core banking systems can be seen in the case of RBS who systems fell over for a week earlier this year.

“Although a few large banks have elected to use in-house development to modernise their core systems, most banks are electing to implement integrated core systems provided by either global or regional core systems vendors,” added Hunt. “The core vendors have responded to banks’ needs for a less risky approach to modernisation by using SOA to componentise their systems, allowing banks to implement single systems or even individual processes within the system.”

According to Frank Brienzi, general manager of Oracle Financial Services’ global business unit: "[The] Oracle Banking Platform provides a comprehensive suite of applications that makes the replacement of core systems viable for large banks, enabling strategic choices as well as providing a high level of flexibility and value."

If banks will have the money to spend on such a new core platform when IT budgets are so tight, as new capital adequacy rules begin to bite and the economic situation worsens, is debatable but presumably Oracle is hopeful that the ability to add components on an ad hoc basis will gain some traction.

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