Union Bank of California Updates Pay System

Union Bank of California was perfectly happy with its large-value payments system. But when its vendor, Newton, Mass.-based IntraNet, announced it was changing its technology to run on a different server, the San Francisco-based bank had to decide whether to keep its existing platform and switch suppliers, or invest in new hardware and stick with IntraNet.

It chose IntraNet.

The new payment technology, an upgraded version of IntraNet's Money Transfer System software coupled with IBM hardware, will be operational by the first quarter of 2003, according to Wayne Frost, vice president and manager of systems and technical support in Union Bank of California's wire services division.

The alternative was to start from scratch with a different payment platform and vendor. But $35 billion Union Bank of California had customized many functions to work with MTS, and had enjoyed a 14-year relationship with IntraNet.

"There's a lot of confidence in IntraNet. Because they're moving to a new technology, we will have better opportunities," said Frost.

MTS provides high-volume, real-time funds transfer processing for customer wire transfers and interbank transfers. It communicates with external high-volume fund transfer systems-such as FedWire and SWIFT, both of which are used by the international banking community to facilitate cross-border payments-and with other Union Bank of California systems, including accounting and customer cash management, Frost said.

Until now, MTS ran on the VAX platform, developed by Digital Equipment Corporation and later acquired by Compaq, the producer of computer hardware. VAX was a reliable and scalable platform, said John Stanner, IntraNet's vice president of global development and delivery.

But several years ago, when Compaq announced it was discontinuing VAX production, IntraNet officials realized if they didn't switch platforms, Union Bank of California and other customers that utilize the systems would eventually be stuck with technology they couldn't use.

"It does put the customer in a position where they have to buy new hardware," Stanner said.

He added that it was Compaq, not IntraNet, that forced clients' hands. IntraNet "provided a place to move to without losing applications."

IntraNet ported MTS to IBM's RS 6000 server (part of its eServer pSeries) and the AIX operating system, a version of Unix, Stanner said. Union Bank of California chose the IBM platform for its technological consistency; it hasn't fallen victim to corporate mergers or superior competition, Stanner said.

Scalability was important, too; the IBM server can handle virtually unlimited volume.

So Union Bank of California's now converting its large-volume payment system to IBM servers, an investment Frost said will likely cost in the low seven figure range. But it was the right move, strategically speaking, Frost added.

The IBM server integrates more seamlessly with other systems than the old VAX server, Frost said. Until now, Union Bank of California sometimes needed intermediary hardware or software to link MTS with other functions. For example, the IBM server will make it easier to develop more Web-based services, which could help generate additional income streams for the bank.

Wire transfer systems must be flexible enough to adapt to constantly changing regulations. IntraNet reliably updates its software to keep up with such changes,Frost said.

IntraNet is working with the bank to make the switch, preserving software customizations Union Bank of California created in-house and testing the new software.

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By The Numbers

ONLINE SALES

2000

$44.2 million

2002

$61.8 billion

ONLINE FRAUD LOSSES

2000

$499 million

2002

$700 billion

Source: GartnerGroup