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Mediobanca together with Oracle to innovate our CIB core banking system

By Marco Pozzi, Group COO at Mediobanca, CEO & General Manager at Mediobanca Innovation Services, CEO and GM of Mediobanca Innovation ServicesDecember 21, 2022
 

Pozzi first posted this story on LinkedIn. Read it here.

Change is part of life, including that of IT systems. Aware of this, we have long since embarked on a very broad Digital Transformation journey that is affecting the entire Mediobanca Group. Within this journey we are facing different and challenging stages such as the one that led us to innovate our core banking system in Corporate and Investment Banking through the use of the public cloud in a SaaS Software as a Service mode in collaboration with Oracle.

When we talk about core banking systems today, we are referring to systems that have historically been the pillars on which all bank operations have been built. As such, however, these pillars have been exposed to the inevitable ravages of time. Core banking systems built on mainframe technologies, however robust, are no longer agile enough today to keep up with the new demands of the digital world and customer expectations. Indeed, not only do they have high maintenance costs, but they cannot be evolved with the speed and efficiency that the market requires to stay competitive. They therefore often represent a limitation to the definition and delivery of innovative services to customers and cause difficulties in updating them, since their evolution over time has been almost always characterized by a marked "customization" logic.

Each bank has generally built its core banking in a traditional way, maintaining in-house tasks of continuous evolution, and updating. This model today may have reached the end of its cycle, given the lack of consistency with current market practices. Given this set of pain points, the challenge that we as Mediobanca took up was: how to transform these systems efficiently while ensuring that our clients receive all the benefits of the digital world? A question preparatory to an even broader reflection on our overall approach to the digitization of services, not only of those aimed at retail bank clients, but also of corporate banking and private banking.

Our digital agenda a few years ago had already prompted us to think along broader lines by mapping out a multi-year Innovation path that will accompany us into the future. In this overall framework, the upgrade of core banking systems represents one of the most important steps towards our “Journey to Cloud”. This is one of the pillars on which our digital transformation path is based, aimed at the Group’s increasing adoption of the public cloud.

In collaboration with Oracle, we chose to maintain the FLEXCUBE core banking platform, upgrade it in its entirety and move it to the public cloud with Oracle Cloud Infrastructure (OCI).

The model adopted is Software as a Service, which is simple and effective thanks to a pay-per-use logic. Beyond the benefits in terms of flexibility and efficiency, this choice allowed us to simplify our IT portfolio and consolidate on a single platform many of the customizations we had already completed. In this way we reconciled the need for simpler maintenance with a faster and more efficient upgrade capability. FLEXCUBE, with its microservice architecture and the clear separation between the platform kernel and the customization layer, allows for continuous software updates, overcoming the age-old problem of obsolescence.

What we have achieved certainly, amongst Italy’s largest banks, is the first implementation of core banking on public cloud: a disruptive innovation for Corporate Investment Banking.

A path full of satisfaction but also complex, one that required alignment and verification work with several counterparts.

First and foremost, we implemented the control functions to ensure that the project was fully compliant with industry regulations and in line with the security and service continuity standards we are used to adopting. Also, necessary and essential was the involvement of compliance as well as the Data Protection Officer on GDPR issues.

We faced complexities, not taken for granted so far in the market. Of course, our project could have been carried out in a traditional way in our data center, but we believed in the promise of the cloud, which offered us prospects for evolution that were much more synergistic with the roadmap we were giving ourselves in terms of digital transformation. In particular, the choice to use this core banking system in the public cloud as SaaS has substantially simplified our operating model and allows us to now have a single point of accountability to ensure the proper end-to-end operation of the service and the compliance with Service Level Agreements.

What we have achieved with Oracle FLEXCUBE in the cloud is just the first stage of our cloud journey: we have identified a path of evolution in cloud adoption that we believe will continue to provide us many benefits.

We are identifying several areas where we believe the cloud can offer significant opportunities to upgrade traditional IT systems and a great increase in flexibility. With this in mind, I believe that the traditional role of IT will also have to evolve significantly and will be increasingly stretched toward orchestrating hybrid sourcing models.