Union Bank of the Philippines Lower TCO with Legacy Replacement
Union Bank of the Philippines (UBP) is among the top ten banks in Philippines and aims to become the most preferred bank leveraging new generation technology. It has 111 branches and handles about 250,000 transactions a day.
UBP was the first amongst the top tier banks in the region to move from a legacy mainframe platform to open standard UNIX platform and a new-generation core banking solution. The earlier back-office engine was Systematics running on refurbished mainframes. UBP chose Finacle core banking from Infosys to replace its mainframe based legacy system. The project was envisaged to be the first ‘big bang’ implementation in Philippines market in which all 111 branches would go live in around 11 months from the start of implementation. The complete retail operations were to be handled out of Finacle core banking (CASA, Loans, Deposit and GL) from day one. In a market which has generally seen a phased out implementation of these retail modules, this project was a landmark one and certainly one of the most watched out for.
Key Business Drivers
Business Agility and Speed of Innovation
The key drivers for UBP to initiate this migration from legacy systems to a new-generation technology was to attain business agility and become more responsive to its ever demanding customers. The new system was expected to help them innovate rapidly in a highly competitive marketplace and differentiate themselves.
Need to Grow
UBP wanted to increase its market share and acquire new customers more rapidly than before. And the only way to achieve this was by offering differentiated products and service, at attractive overall costs.
UBP realized that while migration is very critical, it cannot be at a very high cost. TCO was a very important factor and the cost of moving to the new technology had to be less than continuing with the mainframe-based legacy system.
Infosys identified all the applications on the mainframe and proposed viable alternatives for all the existing systems. This was a key component of the proposed solution which gave the bank an investment proposal that would clearly justify a case for moving out of the mainframe with a clear TCO advantage over a five-year period. Finacle’s architecture also enabled the bank to completely do away with the branch IT infrastructure which proved to be a big plus. The evaluation process also comprised of a detailed solution walkthrough that helped highlight the limitations of the existing legacy system and bring out the key solution benefits of Finacle in the following areas:
- Unified CIF
- Integrated front office and back office system
- 24X7 banking
- Integrated channel connectivity
- Time-to-market advantage
Over a brief five-day gap analysis, Infosys was able to bring out key process improvements in the areas of CIF, accounts management, limit monitoring, tracking and collection of charges, customer services and a host of new product offerings, besides the standard USP's. This along with significant process improvements over their current practices and a clear advantage in terms of ROI presented the bank with a very strong business case to go ahead with replacement of their legacy system with the core banking solution from Finacle.
Finacle solution highlights
- Localization of the solution
- Interface to the clearing house - prompt payment discount, bill payment at the branches, withdrawal tax collections etc.
- Local signatures without going for local branch server
- Product enhancements & customization
- For clearing purposes, auto loans and parri-passu loans
- Customization to support utility bill payments for various types of billers
- Customization in the area of payroll accounts
- Strategy to support both dollar and Peso bookkeeping
- Extensibility tool kit used to ensure easy account opening and maintenance purpose
- 120 central bank reports designed and included into the solution which the bank has been able to use effectively from day one.
Highlights of the project
- The first “Big-Bang” Finacle core banking implementation for over 110 branches in The Philippines.
- A bank-wide consolidated of general ledger in Finacle from other systems in the bank like Opics Treasury system, TFS Trade finance system, CardPAC credit card system, home- grown Trust system etc.
- Finacle had an interface with all delivery channels at the bank like ATM's (Base24), Corporate and Retail Internet Banking, Megalink inter-bank ATM network
- Highly transacted with 700 users logging on to Finacle solution, concurrently, every day.
- 40% of all daily transactions were utility bill payments which is handled through a customized bill payment module in Finacle
- Highly user friendly system with 90% of front-office operations done through Finacle, using a browser.
Reaping the Benefits
FTCO – The key driver
Total Cost of Ownership was a clear driver for the bank to go ahead with the core banking replacement. With the replacement of its legacy solution with Finacle, the bank would be able to get, over a 5 year horizon, a 15-17% reduction in overall costs. The Bank is projected to be able to reduce its hardware maintenance costs by 46% over a 5 year horizon and these substantial savings are what have prompted the bank to go ahead with a decision to replace its legacy system.
Process efficiencies – enhancing ease of doing business
The migration helped UBP achieve many process efficiencies and helped streamline its business enabling it to be more responsive to its customers. Processes which were earlier manually done were transformed to an online mode, thus saving an effort and time on charges, reconciliation between GL and sub-GL, limits monitoring, clearing, etc. One of the major enhancements in process efficiency was the reduction in time-to-market for new products.
The joint project coordination between Infosys and Union Bank’s core team helped to streamline processes, aiding ease of doing business with Union Bank by the customer. This joint effort ensured that project timelines were on-track and deliverables adhered to strictly making this challenging implementation a success in the budgeted timeframe.
View From the Top
“With this migration from legacy to the Finacle solution, we will be able to cut our technology costs by about 15%. The solution itself will reduce the overall costs of scaling up and as we grow larger, costs will come down. Apart from reduced costs, the solution will also help us focus on individual needs of our target customers. Union bank will move from being a product-centric bank to a customer –centric bank with this migration”
“Our old mainframe technology had prevented us from offering new products and services because it was proprietary, hence, could not run other applications from other vendors unlike the present open-based solution Finacle from Infosys”
Chairman, Union Bank of the Philippines