• An enormous amount of care
• A good appetite for risk
• An enormous amount of money
• A huge amount of managerial focus

This is the formula Australia’s Commonwealth Bank embraced to engineer a transformation of its core banking architecture, according to chief Ian Narev.

The five-year $A1 billion initiative was completed in October last year.

Commenting in a Business Spectator interview, Narev said that of the big four Australian banks (NAB, Westpac and ANZ are the others) his is in the strongest position

“We’ve got every single customer for deposits and transaction accounts onto a state of the art real time platform,” Narev said. “We’re the only major bank to have that for all our customers across the whole platform – and after five years we’ve migrated the entire legacy bank onto it.

“So, if you believe that the capability we have is something banks need, then that takes four or five years to build minimum. Over time I expect it will go more to customer preference and this differentiation that we’re talking about will be seen by customers. And we particularly think it’s around this real time capability.”

The bank chief agreed that part of the investment in the upgrade was defensive in nature.

“Whether it’s Google, Yahoo, Apple, PayPal, or other device manufacturers, you can choose your competitor. All of them at some point have given thought to how they might play in financial services.

“Their strategies I think are still works in progress, but we feel that it’s very important to have a state of the art technology platform, so we’re able to compete not only with traditional banking models, but increasingly with technology powered models as they become more significant.”

Narev said the revitalised platform was a significant contributor to the bank’s impressive FY13 financial performance so far (it is on track for a record full year profit of $A 7.6 billion).

He said the recent increase in transaction account activity was a result of the new real time capability.

“All businesses and customer deposits are on there. The real time banking enabling merchants to get real time value for depositing their takings with us and use it the minute it’s in the bank, so merchants can deposit their takings in a branch on a Saturday, see it immediately on their iPhone and pay someone with that taking immediately or get value for it immediately, not retrospectively credited seventy-two hours later. So, those sorts of things are starting to show up in the results, as are the first signs of the productivity benefits we’re looking for,” Narev said.

The engagement of senior management has been key as it has facilitated the adoption of new-generation, Internet native, 21-century Business Technology across the bank, which, for a conservative, traditionally risk adverse organisation such as a major financial institution, has been a huge task.

The bank has a CMO, in the form of Andy Lark, and a progressive CIO in Michael Harte who appear to be committed to working together. Check out how both Lark and Harte explain how they have aligned to deliver Salesforce.com’s Chatter collaboration capability and new Force.com tools:

http://youtu.be/A98NFBm8b9U

Harte doesn’t hesitate to challenge conventional IT nostrums about security, privacy and data sovereignty issues as genuine barriers to Cloud adoption.

Harte told an industry conference in Sydney late last year, that “we’ve halved storage, app testing and development costs. We’ve got a wide range of technology functions as a service.

“You’re delivering services up on demand within minutes or within days rather than within days, months, weeks, that it normally took.

“Our traditional suppliers came to us and said, ‘this on-demand stuff doesn’t look very secure, mate’. Those concerns are garbage.”

One new capability, enabled by the transformation, is the bank’s MyWealth platform., which allows customers to conduct both their banking and investing on one website.

Users can buy shares, funds and fixed interest investments, receive tailored news feeds based on their investments, and get a “big picture” view of their total wealth.

This integrated offering would not have been possible without the core banking transformation.

The bank plans to add superannuation and property functionalities in coming months as it addressing a growing customer demand for self-directed investing.

Finally, for those outside of the Australian market, the Commonwealth Bank has a market capitalization of more than $A 100 billion. That number is bigger than the total market cap of the banking sector in countries like Germany, Italy, or Singapore. You read that correctly, one single Australian bank is worth more than all the banks in Germany, at least according to the share market.

We’re not talking about a small-beer financial services player here.