Finacle vs Temenos in core banking system selection in Israel

Finacle vs Temenos in core banking system selection in Israel

EXCLUSIVE: Union Bank of Israel (also known by its Hebrew name – Bank Igud) is looking for a new core banking system and supplier.

The bank is the sixth largest in Israel, with 36 branches and 1,200+ employees. It provides a broad range of services to retail and commercial customers.

Banking Technology understands the bank’s search has come down to two finalists: Temenos with its T24 core banking system and Infosys with Finacle.

There are no known installations of Finacle in the country, while Temenos has one customer, Pepper, which is a new digital bank launched this summer by Bank Leumi.

There is also a “fresh” installation of the TCS Bancs core system, provided by India-based TCS Financial Solutions, at Yahav Bank. The bank went live with the new system earlier this year, describing the project as “the world’s most complex”. The solution is provided on a hosted basis.

It is understood TCS Bancs is also in the running for the Union Bank of Israel deal.

At present, Union Bank of Israel relies heavily on the aforementioned Bank Leumi for its technology needs. According to Union Bank of Israel’s latest annual report, Bank Leumi provides it with “the main computer and operation services by outsourcing” as well as support and maintenance services and training infrastructure. “In addition, the bank operates independent computing systems self-developed or developed by software houses,” it says in the Union Bank of Israel’s report.

This ten-year deal with Bank Leumi ended on 31 December 2016. The two parties are now in the “Engagement Termination Project” phase, which will end on 31 December 2019.

“Within its framework, the parties are preparing to gradually terminate the engagement between them,” the report explains. “During this period, the bank will examine alternatives to receive computing services in the future.”

In 2016, the bank “started the process of actual examination of alternative suppliers, in collaboration with professional teams of experts, and within this framework, approached various suppliers in order to receive offers for computing and operation services”.

According to the figures in the annual report, the bank’s expenses related to its IT (reported in the P&L statement) totalled ILS 203 million ($57.7 million) in 2016. Of these, ILS 22 million ($6.2 million) was spent on salaries and related expenses; ILS 39 million ($11.1 million) on depreciation and amortisation; and ILS 142 million ($40.3 million) went towards other expenses, mainly outsourcing.

There was also ILS 29 million ($8.2 million) in costs in respect to IT that were recorded as assets in the bank’s annual financial results for 2016.

As for the bank’s legacy tech supplier, Bank Leumi, it is also working on its own IT modernisation initiatives. In 2015, the bank signed with Temenos to replace its legacy mortgage solution with T24. At the time of announcing the deal, Bank Leumi said the total investment in this project would not be material, but pointed out that “the agreement includes the possibility of the bank continuing the project so that, in the future, it will include expanding the project to replacing other core systems of the bank”.