Bank on IT: How the CBA and BoQ do IT

Michael Harte CIO, Commonwealth Bank of Australia

Each morning, sometime between 9 and 10am, internet banking usage at the Commonwealth Bank of Australia (CBA) peaks as just over 100,000 NetBank users log in to check their accounts, pay bills and transfer funds. About $20 billion worth of transactions are made through Netbank every month. And, increasingly, internet banking is not just about moving money around on the Web. The bank's 2.7 million active NetBank users are also taking up new services such as card activation, two-factor authentication and online business services.

The infrastructure and resources powering all this is understandably immense. And underpinning it is the Commonwealth Bank's Enterprise Services management team, headed by group executive and chief information officer, Michael Harte. Enterprise Services is in the midst of a gargantuan program that encompasses online services, enhanced telecommunications and, perhaps most significantly, a four-year, $580 million core banking modernisation to update existing legacy systems and processes within a customer-centric integrated platform.

Ambitious? Harte doesn't think so. The program is tracking well; various milestones have already been met and, as Harte points out, the team has "a proven track record of execution".

"It's not just a slogan," Harte says. "We are getting out of utility and beyond IT in operations. We have a wonderful opportunity to provide our customers more, to learn about their insights, understand their interactions and transaction preferences and allow them to customise what they want."

To support this, the bank opened a new data centre in Sydney - 2000 square metres of usable dual-chamber computer room floor space with full dual Hot Hot redundancy. It also launched a grid-based platform, Oracle as a Service that provides database processing services on demand. It deployed a range of project management initiatives, including Project Governance and Delivery Excellence, Solutions Delivery Lifecycle - which combines intellectual property from SAP and Accenture - and Service Management Maturity. And it developed a multi-partner operating model, introducing repeatable business practice across the enterprise.

The CBA is in an enviable position from an IT management perspective. Its chief executive, Ralph Norris, was himself chief information officer and therefore has a unique understanding of the opportunities IT can bring to an enterprise.

Enterprise services supports 38,000 staff, 9.3 million customers, 1009 branches and 3300 automatic teller machines, managing. Together NetBank, CommSec and CommBiz account for the highest volume of transaction Web sites in the southern hemisphere.

"It's not just the vanilla IT of being cheaper, faster, better. It's about going beyond. We have created the online platform and increasingly tailor to customer presence. Telstra's rollout is well underway," Harte says, referring to the 10-year, $1 billion contract awarded to Telstra in April to provide converged communications for voice, data and video across branches, contact centres, EFTPOS and ATMS.

Earlier this year, the CBA rolled out its new internet banking portal as part of the Finest Online program, adding extra features such as the ability to apply for a credit card online and access more accounts. It also introduced mobile internet banking on 14 of the most popular devices, becoming the first brokerage on the iPhone along the way.

"All the things we're doing, whether it's Finest Online, the IP convergence, networks or the core logic that is going to run the entire bank in terms of how we compute in the future, it's all based on meeting the individual needs of the customers," says Harte. "That's a significant proposition; having the architecture to deliver that.

“The three proof points are leveraging the strategic access that we already have. We have a great team and they have all signed up for the culture of service delivery and leadership, from middle management through to our partners. And the core in and of itself is the greatest enabler to that real time accessibility."

Satisfaction guaranteed

A key initiative of the 'customer centric' approach is the creation of a '40 per cent' standard across the organisation’s management teams; 40 per cent of ‘at risk’ pay — which is also judged on performance indicators such as financial and project delivery — is reliant on reaching specific customer satisfaction targets.

“Everyone across the Enterprise Service team is measured by a 40 per cent customer satisfaction KPI — if our customers are not happy with the reliability of a system, ease of use and access, richness of features and function, then our staff will be penalised,” Harte says.

The approach runs right through to the bank's supply chain so that partners, including SAP and Telstra, are held to the same standard.

“Increasingly, we are building deeper relationships with strategic partners such SAP and Accenture, Oracle, IBM and HP,” Harte says. “Partners are also increasingly involved in our sales and service methodology to become more reliable and responsive.”

The move is aimed at rewarding partners for involvement in the business and performance rather than punishing for non-performance, a situation all too common in many service level agreements (SLAs). Roy Morgan independently audits retail customers for satisfaction and Assert and Insight looks measures success rates for business banking and wealth management operations.

“We are interested in having the [partner’s] account team turn up to work every day and think that 40 per cent of their pay is dependent on how happy they keep the bank and how happy they keep the bank’s customers,” executive general manager, Nick Holdsworth, said. “It changes the conversation with partners at the time of review from: 'I’m sorry about that outage, but we still met the SLA' to 'I’d really like to understand what effect that outage had on customers as it has a direct impact on me'."

The inadequacies of the SLA model could be born out by a simple statistic, according to Harte: the "lunatic situation" of a telephony availability of 99.98 per cent that still lets the carrier have dead air that loses 6000-8000 calls in a morning.

Page Break

Updating the core

None of this would be possible, however, without the underlying core systems. The bank formally announced its Core Banking Modernisation program at the end of April last year — an overhaul of existing legacy system and processes. The enterprise is now about a third of the way through its schedule and has selected SAP for Banking Solutions as a new core platform and Accenture as the program implementation partner. The program's benefits will target customer service, growth, efficiency and risk mitigation. First Home Saver accounts and Colonial First State term deposits are already on the new platform.

"We've made an undertaking that we'll be finished this in four years and we're currently ahead of schedule," says Dave Curran, executive general manager of the core banking modernisation. Curran has been leading the program for the last two and a half years and has been with the group for six years in various roles, including heading up Operations and Technology for the retail services division.

“We have watched a lot of organisations globally, before and during, get bogged down in analysis paralysis; we don’t allow people to slip on decisions and go back and revisit things,” Curran said. “That has let us build some contingency in our schedule as we know we will have some surprises; it doesn’t matter how hard you plan."

The surprises include finding undocumented functionalities in its legacy systems which affected customer-facing systems and services, as well as changes to legislation that affects compliance. And acquisitions. The scope was expanded, at about $150 million, to include ASB and BankWest.

“You base things on the documentation and history. But you find things that were put there 30 years ago that nobody knew about, which makes testing and piloting very important — to make sure we pick things up before we put something into production that will affect customers,” Curran says.

The core overhaul team are systematically working their way through deposits and transactions and the rest will follow. It’s managed around four major planks — the customer, transaction, deposit processing and lending.

"A good example is bank statements," Curran explains. "If you had different product systems — which we've had in the past — then you have different statements and different processes for each of those because they're separate. But a statement is a way to communicate to the customer their balance, transaction history and other information. It should be a common piece that you use whether you're talking about a term deposit, a home loan, a personal loan or a savings account. In the past, when we had different solutions for each of them we had different products for each of them. If you go to common basics, the saving process should be the same. The way you calculate interest should be the same, the way you post interest, should the same.

"We try not to talk about the products within that - the business will package those up and provide offers for the customers. From our point of view it's the capabilities that underpin those."

• 38,000 staff
• 9.3 million customers
• 1009 branches
• 3300 ATMs
• 4 million credit card accounts
• 187,000 EFTPOS machines
• 5.18 million POS transactions daily
• 10+ call centres
• 120 million calls per annum
• $185 billion mortgage portfolio
• 2.7 million active Netbank users
• 70,000 new registrations each month
• 100,000 regular mobile banking customers
• $20 billion NetBank transactions each month

Deals of the decade

Telstra's 10-year deal with the Commonwealth Bank is not new, although the scope is considerably larger than many implementations. Earlier this year, the Bank Of Queensland extended a 10-year agreement with the telco in a $21 million, three-year deal. Telstra will deliver the bank's fixed lines, voice, data and internet services running on Telstra Next G and Telstra Next IP networks, as well a provision Blackberry devices. The deal came on the back of an exhaustive market review.

Since 2002, Bank of Queensland customers have undertaking telephone banking through natural language voice recognition. But the bank has also partnered with Dimension Data to refresh the technology to include dual tone multi frequency (DTMF) within the platform so customers can also access their accounts through touch tone.

"Customers have the choice of whether they want to use the traditional touch tone, or whether they want to use the voice recognition," head of direct banking, Craig Brownfield, says. "Voice isn't new for us but we've added in the other technology."

The upgrade is a scheduled update, Brownfield says, and includes both a software and hardware refresh.

"Both DTMF and the voice operate off the one environment and that's really the key thing about how we deliver those through the channels," he says. "From a customer perspective, it's about choosing the interaction method and the one registration works for both services. It's very similar to the way we've launched our internet banking and mobile phone banking and SMS. It's all through the one channel just with multi-access points to the customer. If they register for internet banking they also get mobile banking and SMS as part of that. The benefit is it's not about multiple user passwords and IDs. It's about one access point and they choose the method of interaction."

The main driver was to provide the customers with a choice. Although speech has both useful and very successful for the bank, the idea was to give its customers a choice of when it made sense to use different methods, such as on transport or an office environment, when it doesn't make sense to be talking about transactions. Customer requests played a part in the decision to upgrade, but there was also an internal push.

"We've always only had voice - that's the only service our customers have known. But we've had a couple of acquisitions in the last couple of years from building societies that have had touch and their customers are very comfortable with it. There has been some feedback but it was more about being appropriate for different environments."

A recent Dimension Data survey indicates customers preferred internet banking over voice services, but Brownfield says banks must provide both functions to keep customers happy.

"It's different by demographic and function," he says. "For a more complex transaction, yes, an internet interface is obviously much simpler but for utility functions that can be done over the phone, we've had some very good results from speech. It's about convenience - they type of transaction. SMS is the same - very simple, very quick.

"Since we've launched the touch option, we're seeing a 70/30 split in usage - 70 per cent speech, 30 per cent touch. It's pretty much in line with what we expected. And it has stayed fairly consistent since launch. From a direct banking perspective, a lot of the things we've done is about providing the option of choice for customers and making it as seamless as we can. If we look at it from a call centre perspective, we'd like to keep that interaction as quick as possible. We don't want long decision trees and options. It should be one layer at most and then straight through to an operated. But for the automated services, it's about choice. The services we're talking about here are financial transactions versus the call centre which are more enquiry or product-based.

The bank is now looking at ways to provide additional support online, such as chat agents and click-to-call plans.

"We're evaluating those technologies and where they fit into the model. It's about offering the right service at the right interaction point," Brownfield says.

This article first appeared in the October/November print edition of Computerworld.