NAB's IT transformation steaming ahead, says its driver
His comments come just days ahead of an expected major strategy announcement around the bank's IT transformation on March 13. It will mark the culmination of a wide-ranging high-level review initiated late last year after criticism of the bank by shareholders.
The bank has said little about the content of the announcement, beyond telling the ASX the transformation project continued "to make good progress".
Mr Bennett, the bank's executive general manager of IT transformation, told a meeting organised by the Committee for the Economic Development of Australia (CEDA) in Sydney last week, it was too early to declare a winner in the so-called banking tech wars.
He claimed NextGen, a five-year project to install a new core banking system, would be "the differentiator that will give NAB the competitive edge". It began in 2008 and would be due for completion this year, but the bank has avoided questions on when it will be fully implemented.
Mr Bennett said it was "the most complex task the bank's ever undertaken" and would retire 100 legacy applications, making the bank more responsive to changes in the marketplace.
"NextGen is already in our environment and operating well," Mr Bennett said, referring to NAB's subsidiary UBank, which moved 300,000 customers to the platform in August. "To use a simple analogy, the rail tracks are laid, the engine in on the rails, and we are adding more carriages."
At the core of NextGen is banking software from Indian company i-flex, majority owned by Oracle. At the time, India's Economic Times put the value of the contract for i-flex at $US90 million.
Mr Bennett said the bank was "a third of the way through a 10-year journey to fundamentally transform our whole operating environment".
A spokesman for Mr Bennett later said a timeframe was no longer being placed on NextGen but on the entire transformation project.
"Big projects like this have revisions and their milestones change. We talk now about our total environment transformation. It gives a bigger and more correct picture of the work being undertaken," the spokesman said.
Denise Montgomery, financial services research director with Ovum, questioned the bank's ability to extend i-flex to the rest of its operations. She described i-flex as "a product designed for second-tier Indian banks, not large sophisticated multi-finance Australian banks", although it had been totally re-engineered by Oracle to meet the needs of NAB.
"It is all very well to have UBank on it but UBank is a very simple banking model. What is NAB's strategy when it comes to running the rest of the bank on it?"
Ms Montgomery said that, of Australia's big four banks, only Commonwealth Bank and NAB had attempted a full transformation of their core banking systems, and only CBA had so far achieved success.
"CBA is the only one that has a solid industrial-strength base. NAB are having a go at it but because of the way they bought it, they have still only got it operating in that traditional retail deposit vertical. It will be a long and painful journey for them to having an industrial-strength, agile base."
Frequently Asked Questions about this Article…
NAB’s IT transformation is a long-term program to modernise the bank’s whole operating environment. NextGen is the core banking component of that program — a project to install new banking software that NAB says will help retire legacy systems, make the bank more responsive to market changes and provide a competitive edge.
NAB’s IT chief, Adam Bennett, has reiterated the project is ‘on track’, but the bank has not given a firm estimated finish date for the NextGen core banking replacement. NextGen began in 2008 and was originally a five‑year effort due to complete this year, but NAB has avoided specifying a final implementation date and now talks about the broader 10‑year transformation timeline.
NAB says NextGen is already operating in its environment: the bank’s UBank business moved about 300,000 customers onto the NextGen platform in August. Management also says the overall transformation is around a third of the way through a 10‑year journey and plans to retire about 100 legacy applications.
At the core of NextGen is banking software from Indian company i‑flex, which is majority owned by Oracle. Press reports at the time put the value of the i‑flex contract at about US$90 million.
NAB says NextGen will be a ‘differentiator’ that gives the bank a competitive edge by replacing ageing systems, retiring roughly 100 legacy applications, improving agility and making the bank more responsive to changes in the marketplace — outcomes shareholders generally view positively if achieved.
Industry analysts have questioned whether the i‑flex platform can be extended across NAB’s complex operations. Denise Montgomery of Ovum noted i‑flex was originally designed for second‑tier Indian banks and cautioned that moving from a simple retail model (like UBank) to the wider NAB business will be a long, potentially painful journey. She also pointed out that among Australia’s big four banks, only Commonwealth Bank has so far achieved a full core banking transformation successfully.
A major strategy announcement on NAB’s IT transformation was expected around March 13, described as the culmination of a high‑level review initiated after shareholder criticism. Until the bank releases that update, details remain limited, although NAB has told the ASX the project is ‘making good progress.’
For everyday investors, NAB’s transformation is a material, long‑term change program with potential upside if it improves efficiency and competitiveness, but it also carries execution risk and uncertainty around timing. Watching official updates, milestone announcements and independent analyst commentary can help investors assess progress and potential impact on the bank’s performance.
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