Shinsei Bank Gains New Life Using i-flex

Even in financial technology, the apple doesn't fall far from the tree.

Citibank formed an offshore development facility in India in 1989, which it spun off into an independent unit in 1992. Since then, i-flex solutions has grown to encompass wholesale and retail banking solutions for back office, Internet banking and business intelligence, and offers consulting and custom software development services to banks worldwide. Citibank's venture capital division remains a minority investor.

Befitting its parentage, i-flex has expanded to cover a global footprint of over 300 financial industry customers in 75 countries. Furthermore, Citibank itself, after a three-year review of financial technology providers, chose to deploy the i-flex platform throughout the 101 countries it serves.

In Japan, Shinsei Bank recently adopted i-flex's Flexcube Universal Banking System (UBS) in its entirety. "Shinsei is using every piece of our product suite," said Dennis Roman, chief marketing officer at San Rafael, Calif.-based i-flex solutions.

Although Flexcube can run on both Windows NT and Unix workstations, Shinsei uses NT exclusively. "It all runs on NT-the whole bank," said Roman. "The cost model for the bank is de minimus."

Flexcube UBS supports new and strategic retail banking products, a flexible and integrated corporate banking platform and a multi-currency general ledger that has enabled Shinsei Bank to expand its banking operations. Flexcube also supports new delivery channels (Internet banking, ATM, mobile banking, telebanking and call centers, and point-of-sale terminals), allowing Shinsei Bank to reach out to new target segments and customers. Finally, i-flex's data warehousing and information management system allows Shinsei Bank to access and analyze customer and product profitability, and credit risk management.

Formerly the Long-Term Credit Bank of Japan, the aptly-named, recapitalized Shinsei (Japanese for "rebirth") was able to quickly and inexpensively begin to compete for consumer relationships using Flexcube. The chairman of the bank, Masamoto Yashiro, was quoted as saying that Shinsei was able to enter the Japanese retail market in mid-2001 at one-third the time and at one-tenth the cost of a comparable mainframe deployment.

Shinsei also began offering previously unavailable services, such as joint bank accounts, free around-the-clock access to ATMs, and real-time access to account balances. "If you do a transaction at an ATM and you want confirmation on your PDA, you'll get it in real time," said Roman. "Very few banks and probably no other in Japan can offer real-time information across Internet, ATM and PDA channels."

The new software also has advantages for corporate customers. "A corporate customer could be drawing down a credit line in one country and doing an FX transaction in another," said Roman. "Flexcube is literally capable of doing real-time risk management."

These capabilities are going to be hard for Shinsei's competition to replicate without undergoing radical changes of their own. "The competitors are running on stuff that's 20 years old," said Roman. "Many are still running on mainframes."

In the meantime, Shinsei Bank hopes to grow from its current customer base of approximately 250,000 to the 1 million mark within three years. "These are very forward-looking, visionary bankers," said Roman. "Some of them have come from Citibank, as a matter of fact."

It won't be too long until the lessons learned in the Japanese market will have an impact on U.S. banks. Now that Gramm-Leach-Bliley allows bank-backed companies to enter a wider range of non-bank businesses, i-flex solutions has entered the U.S. market with its full range of financial industry products and services. The company has initially targeted international banks doing business within the U.S. "Doing branch banking overseas is our bread and butter," said Roman.