ibm banking: core banking transformation with system z

8/14/2019 IBM Banking: Core Banking Transformation with System z

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Service-

oriented

architecture

Revolutionizing today's

banking systems

Application InnovaServices

Banking

IBM Institute for Business Value

IBM Global Business Services


2/16

IBM Institute or Business ValueIBM Global Business Services, through the IBM Institute for Business Value,

develops fact-based strategic insights for senior executives around critical public

and private sector issues. This executive brief is based on an in-depth study by

the Institutes research team. It is part of an ongoing commitment by IBM Global

Business Services to provide analysis and viewpoints that help companies realize

business value. You may contact the authors or send an e-mail to [email protected]

for more information.


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1

Globalization continues to pressure industries for increased collaboration

within their value chains. The banking industry, a virtual backbone for all

other industries, feels this pressure both within their industry and with those

they serve. Collaboration demands technology integration, and approachesso far have resulted in redundancy and inefficiency wired together with

inefficient systems. Through a modular approach to underlying technology

integration, service-oriented architecture (SOA) can help reduce redundancy,

inflexibility and inefficiency in crucial banking processes such as payments,

multichannel integration and account opening.

Service-oriented architectureRevolutionizing today's banking systems

By Jay DiMare and Richard S. Ma

Service-oriented architecture

Bankingcustomers(thanksinlargepart

totheInternet,whichhasalteredthe

balanceofpowerbetweencompanies

andcustomerseverywhere)aregoingto

demandmoreadvocacy,morepersonal

securityand,aboveall,morecontrolintheir

bankingrelationships.

Withtheuniversalbankingbusiness

modelcomingunderincreasingpressure,

communitybanks,industryspecialistsand

non-bankswillcompetebyofferingunique

andrelevantvaluetotargetedgroupsof

customers.

Banks,recognizingthatnomatterhowgood

theyare,theycannotbeworld-classin

everythingtheydo,willsourceproductsand

IntroductionItsnosecrettobanksandtheircustomers

alikethatthebankingindustryisfacing

significantchallenges.Itsalsoevidentthat

therequirementsfordoingbusinesssuccess-

fullyindeedatallaregoingtochange

dramaticallyoverthenextdecade.Theques-

tionis,giventhenatureoftodaysbanks,and

giventhewaytheytend(orareable)toreact

tochange,aretheypreparedforavastly

differentfuture?Andjusthowdifferentwillthe

futurebe?

AccordingtoanIBMInstituteforBusiness

Valuestudy,TheparadoxofBanking2015:

Achievingmorebydoingless,thefuture,

byanymeasure,isgoingtobedrastically

different:


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3 Service-oriented architecture

Service-oriented architectureRevolutionizing today's banking systems

SOAisanITarchitecturalstylethatsepa-

ratesanorganizationsapplicationsintotheirelementalparts,calledservicecomponents

(commonbusinesscommandslikecheck

creditorcalculateinterestrate,forexample).

Thesecanthenberearrangedwithunprec-

edentedspeedtocreatenewapplications

(meaning,amongotherthings,thatbanks

canextendthelifeofexistingITassetsalmost

indefinitely,andconserveonthepurchase

ofnewassets).ThinkoftheLegotoy,orthe

atomicelements.Fromafewbasicparts,

bankscancreateavirtuallyunlimitednumber

ofcombinations,ofanysizeorshape.This

modularconceptisattheheartofSOA.

Now,duetoopenbusinessandtechnology

standards,servicecomponentsfroman

institutionsapplicationscanbecombined

withthoseofitspartners,suppliersandeven

itscustomerstocreatenewsuperapplica-

tionscompositesoffunctionalitythatcan

spancompaniesandindustries.Throughthis

kindofintegrationandcollaboration,SOAcan

sparkinnovation,andleadtoentirelynewbusi-nessopportunities.

Inessence,SOAmakesITadapttothe

needsofbusinessinawayneverbefore

possible.BeforeSOA,tohavethislevelofflex-

ibility,aninstitutionmighthavecompelledto

deployandintegrate20differentsoftware

applications.WithSOA,anenterprisehasto

buildonlyonewhich,comparativelyfast,it

canreconfigure20differentwaystomeetthe

imperativesofchangingbusinessandmarket

conditions.

Itisthisextraordinaryflexibility(therootof

allSOAbenefits)thatwewilldiscussinthecontextofpayments,multi-channelintegration

andaccountopening.

Simpliying paymentsInpayments,becausethereareduplicate

applicationswithpoint-to-pointconnections,

thearchitectureistraditionallycostlytomain-

tain.SOAcanprovidealayertoreducethe

numberofintegrationpointsanddecrease

overallcoststhroughthereuseofcommon

services

The business challengeInmanybanks,factorssuchasmergeractivity

mountingregulatoryrequirements,globaliza-

tionandelectronicpaymenthaveresulted

inapplicationsthathavebecome,toputthe

matterstarkly,virtuallyimpregnabletowersof

verticality,muchlikeadjacentskyscrapers.

Becausenootherpracticableoptionswere

available,thetendencyhasbeentobuildnew

applicationstomeetnewrequirementsnotto

reconfigureexistingones.

Ingeneral,thishasresultedinduplicate

interfacesandapplications;complexpoint-

to-pointsolutionsthataredifficulttomaintain

andupdate;lessflexibility,sincethebusiness

logicisimprisonedinsiloedapplications;a

lackofstandardsforintegratingapplications;

increasingmaintenanceandimprovement

costs;andalackoftimely,consistentinforma-

tionacrosschannels.


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4 IBM Global Business Services

Furthermore,regulationsliketheEuropean

UnionPaymentServices,BaselII,the

SingaporePaymentSystemsAct,EUCreditfor

Consumers,USCheck21andEUSettlement

&Clearingareforcingchangesintheway

paymentsaremadepavingthewayfornewcompetitors,addingmoretransparencyto

paymentsystemsandexpeditingtheadoption

ofstandardpaymentprotocols.1

Armedwiththechoicesandinformation

providedbytheInternet,customersare

puttingmorepressureonbankstomake

paymentsfaster,lesscostlyand,increasingly,

morecustomized.Thereiscertainlyaninexo-

rablemovetowardelectronicpaymentsand

invoicing,meaningthatbanksmustfollowsuit.

Iftheyaretemptedtoresist,theycouldpayaheavyprice:non-banksowingmainlytothe

availabilityofstandardizedbusinessprocesses

madepossiblebySOAarestartingtoinvade

theplayingfield.

Thegoalisnotnecessarilytobuildor

purchaseanewapplicationeachtimeanew

regulationorcustomerdemandarises;itisto

beabletoreconfigure,totheextentpossible,

existingITassetstoaddresstheseevolving

requirements.

How it works todayFigure1showsageneralizedviewofthe

currentpaymentssituation.Thetangleof

linesamongtheenterprisesystemsandthe

externalpaymentssystemsorchannelsvividly

illustratestheproblem.

External paymentchannels

Real time grosssettlement*

Check

Card

Norw: Likely multiple channels, one per country. The UK system is

CHAPS, US is Fed Wire, Singapore is MEPS+, etc.

Source: IBM Institute for Business Value.

Automatedclearing house

FIGURE 1.

Current view o the banking payments domain.

Paymentsystems

Tradefnance

DDA

Bill pay

Cashmanagement

Loan

Treasury

Ontheleftisatypicalsetofcorebanking

systemsthatmayoriginateoraccepta

payment;ontherightarethedifferentpayment

systemsorpaymentchannels.Theimplica-

tionisthatthecoresystems,andthenumber

ofpaymentchannels,canvaryfrombank

tobank,aswellaswithinthebank.Yearsof

changeandsystemsevolutionhavemade

thesituationmorebrittle;asinglechange

canhavesomanyrepercussionsthatbanks

becomediscouragedfromtryingtoadapt.

Thisexample,seeminglysimpleandstraight-

forwardatfirstglance,showssixinternal

connectionslinkingtofourexternalsystems

resultingin24uniquenetworkconnections.

Eachtimeanewinternalsystemisadded,four

newconnectionsmustbecreated.Conversely

eachtimeanewexternalsystemisadded,

youcancreatesixnewconnections.Butthisis

onlypartofthestory.

A primary goal o

using SOA to simpliy

payments is to enable

banks to reconigure

existing IT assets whennew regulations or

customer demands arise

potentially avoiding the

need to build or purchase

new applications.


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Continuingourexample,eachofthe24network

connectionsmustthensupportandmaintain

eighttypesofbusinesstransactions,consisting

ofapproximately160messagetypes.Many

willrecognizethetypesoftransactionsand

messagetypesinFigure2assomethingweknowhappens,butusuallynotdirectlyinthe

contextoftheprimarytransaction.

Now,considerthemath.Inourpartialexample,

wehave160messagetypesandover24

networkconnectionsandwehaventeven

beguntotalkaboutcomplicationslikemain-

tenancecostsorchangesrequiredbythe

paymentchannelstokeepupwithtechnology

changes.Thesheernumberofcombina-

tionsandpermutationsoftransactionsand

messagetypesflowingovervariousnetworkconnectionsisdaunting.Whatisneeded

isasystemthatcanreducethenumberof

connectionsamongallofthepartnersinthe

paymentprocess.Thedifferentcoresystems

canthenabsorbthenewwayofmaking

payments,andwithoutimpactingtheflowof

business.

Integrating payment applicationsInthepast,manybanksattemptedtointe-

gratepaymentapplicationsbyinstallinga

centralpaymenthuborgatewaytodealwith

aspecificbankingpaymentchannel.These

solutionseventuallyevolvedtogateways

supportingmultiple,butstillspecific,payment

channels,andincludeddatatransformation,

messageformatting,loggingandsoon.In

manycases,thesecentralsolutionsarenow

aged,andasinflexibleasthesystemsthey

connect.Worse,theyaddanadditionallayero

fragileconnectionsfurthercomplicatingourmathexample.

SOAprovidesawaytoemployreusable

servicestoconductthedifferentpayment

transactiontypes.Theseservicescanbe

independentofthecorebankingapplica-

tionsystemsandthepaymentchannelsthey

support.ThisapproachisillustratedinFigure3.

Thelayerofservicessupportingpayments

canalsosupportanynumberofpayment

channelsorsystemswithoutcausinganychangetothecoreenterprisesystemsorigi-

natedortargetedbythepayments.Ineffect,

thislayerofservicesabsorbs,orbuffers,

changesmadeinthebanksystemsor

externalpaymentsystems.


FIGURE 2.

Four o eight payment transactions withcorresponding message types.

Accept out-payment instructionModiy out-payment instruction

Generate communication detailsRepair queue

Retrieve in-payment profleAccept in-payment instructionGenerate communication detailsRepair queue

Accept transer instructionRecord transer instructionGenerate communication detailsRepair queue

Accept out-payment instructionModiy out-payment instructionGenerate communication detailsRepair queue

Provide out-payment

Enact in-payment

Provide account transer

Administer paymenttransaction

Sample businesstransactions

Sample messagetypes


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Wecanseetheadvantagenumerically.Inthis

example,SOAreducesthetotalnumberof

networkconnectionsfrom24to10,thetotal

businesstransactionsfrom192to48and,

astoundingly,thetotalnumberofmessagetypesfrom3,840to44.SOAnotonlydecreases

thenumberofconnectionpoints,itenables

thereuseanutterlycentralSOAconceptof

commonmessagetypes.Thisgreatlyincreases

theprobabilitythattheservicescreatedcanbe

usedbymost,ifnotallsystems,withinthebank.

Changescanbemadeinwavestominimize

businessdisruptions.

The value SOA can bringThevaluereturnedtothebankcanbesignifi-

cant.Atitscore,thisapproachsetsthestagetosignificantlyreducecostswithfewerinter-

faces,andfewerbusinesstransactionsand

messagetypestomanage.Plus,thecreation

ofcommonmessagetypescanresultinless

duplicationofeffortandreducedsystems

maintenancecosts.

Importantly,thereareopportunitiesfornew

revenuesources,sincenewsystemssuch

asmobilepaymentscanbeintegratedinto

existingsystems.Currentsolutionsoftenhinde

thebankbyrenderingthecurrentstateinflex-

ibleandresistanttoanyrequestedchanges.

WithSOA,thebankcaneasilyaddnew

paymentchannelsandnewapplicationsto

existingpaymentscapabilitieswithoutupset-

tingbusinessasusual.ThisisreallywhatSOA

isallabout.

Intermsofreducingoperationalrisks,SOAcanenhancemonitoring,sincemoreapplica-

tionsuseacommonapproachtosendingand

receivingpayments.

FIGURE 3.

Proposed SOA services supporting payments.

External payment channels

* Likely multiple channels, one per country. The UK system is CHAPS, US is FedWire, Singapre is MEPS+, etc.


Paymentsystems

Tradefnance

DDA

Bill pay

Cashmanagement

Loan

Treasury

Out-payment servicesGenerateout-paymentinstructionModifyout-paymentinstruction Sendout-paymentinstructionIn-payment servicesReceivein-paymentinstruction Acceptin-paymentinstruction

Account transer services Accepttransferinstruction Testfundsavailability Applyaccountingentry

SOApaymentsservices

e.g., Send out-payment

e.g., Provide out-payment

e.g., Provide out-payment

Bank enterprise systems

Real time grosssettlement*

Check

Card

Automated clearinghouse


9/16


Integrating multiple channelsTraditionally,bankingapplicationsarediscon-

nectedacrosstheorganization,makingit

difficulttooptimizeexistingcustomerpotential.

SOAcanprovideanintegrationlayertoenter-

priseapplications,andanall-encompassingviewofthecustomerrelationship.

The business challengeTooptimizecustomerloyalty,profitabilityand

growth,bankswillhavetocapitalizeonthe

potentialofeachcustomerrelationship,and

providecustomerswiththemostattractive

rangeofproductsandservices.Oneofthe

biggestbarriershereisthelackofintegrated

customerinformationitistypicallyfrag-

mentedacrosschannels.

Fiercecompetitionamongfinancialinstitu-

tionsfueledtoagreatdegreebytheInternet

hasresultedinarangeofproductoffer-

ingstailoredtocustomerneedsandtohelp

reachpotentialcustomers,andbasedonthe

entirerelationshipthecustomerhaswiththe

bank.Thedevelopmentoftheseproductswill

become,webelieve,anincreasingsource

ofsustainablecompetitiveadvantageand,

therefore,awaytoextractpremiumpricing.

Currently,todeveloptheseproducts,banks

mustrelyheavilyondata-gatheringsystems

thatintegrateapplicationswithinthebank.

Theseinteractionsassumingtheyexistat

allarecostlytomaintain(eatingintothe

marginsthatthepremiumpricingwouldother-

wiseincrease),inflexible,andpronetoerror.

How it works todayAsFigure4suggests,thetangledwebof

interfacesrequiredandthelackofavail-

ableinterfacesimpedethebanksrealtime

accesstotherequireddata.

Inmanycases,eachmajorservicegoesto

marketthroughthesamesetofchannels.

Thoughthesechannelsmightdealwiththe

sameproductsandservices,thereisoftenno

integrationamongtheapplicationssupporting

thechannelandtheapplicationssupporting

theproductareas.Forexample,ifacustomer

usesthebankscreditcardservices,heorshemustreinitiatetherelationshipwiththebank

ifapplyingforamortgage,andthenagain

forwealthmanagementservices.Thebank

cannotcapitalizeonthecustomerscurrent

interest,orcountonreachingtheoptimalprice

becauseitcannotaccessalltheinformation

itneeds.Theresultcanbeadissatisfying

experienceforthecustomer,aredundant,

time-consumingandcostlyprocessforthe

bankandamissedopportunitythatishard

torecover.

Core businessapplications


FIGURE 4.Banking channels use o key bank applicationplatorms.

Channelapplications

Teller

ATM

Kiosk

Branchplatorm

Post

Internet

Phone

Retail

Core bankingapplications

Credit cardapplications

Wealth managementapplications

Brokerageapplications


10/16


Information when and where neededToaddressthisproblem,channelapplica-

tionsaretailbranchtelleroraWeb-based

homebankingsystem,forexampleneeda

consistentwaytoaccesscorebankingappli-

cationsintheservicearea.SOAprovidesastandards-basedapproach.

Figure5belowshowsalesscumbersomeway

tointegratechannelapplicationsandservice-

areasupportapplicationsusingasinglesetof

SOAservices.

Aswithpayments,therearetechnologiesthat

candothis.WhatisdifferentwithSOAisthe

services layer.Forexample,inorderforaretail

branchplatformapplicationtogetinformation

aboutthetotalbank/customerrelationship,theapplicationmustconnecttoallproduct

systems,andwillrequireaconstantflowof

realtimeinformationfromthecoresystemsthat

canbeupdatedandviewedacrosschannels.

AsshowninFigure5,thatinformationwould

include:

Customerinformation

Productinformation

Ratesandfees

Balancedetails.

WithSOA,abankcanemploydifferent

categoriesofservicescustomer,product,

balance,historyandcreateastandard

setofservicestoshareinformation.Asingle

getbalanceservice,forinstance,couldbe

appliedtoanyproductwhereitwouldberele-

vant.Acrossmultipleservices,thatamounts

toabigconservationofresources,andhuge

gainsinefficiency.

Returning value with SOA

Thebanknowhasaholisticviewofitscustomer.AndbecausetheSOAlayermakes

iteasiertointegrateapplications,thebankcan

offeritscustomersmoretailoredproductsand

services,atthepremiumpricesthemarketwill

bear.Sinceinformationissharedinrealtime,

controloftheprimaryproductremainswiththe

Core business applications


FIGURE 5.SOA Services supporting channel applications and other service-area applications.

Channel applications

Retail bank supportapplications

Support applications

Wealth managementsupport applications

Credit cards supportapplications

Brokerage supportapplications

SOAservices

Get account details

Retail Internet

Post Phone

Inormation servicesGetrates,fees,lookupAccount servicesCustomerinformationGetaccountdetailsBalances,positionsTransactionsProduct servicesProductdetails

Get account details Core bankingapplications



Brokerageapplications

By integrating customer

inormation across

channels, SOA can

help banks develop and

leverage a holistic viewo each customer to

build customer loyalty

and to oer the most

attractive range o

products and services.


11/16


applicationbestsuitedtomanageit.Eachtime

aserviceorchannelisadded,itcanconnect

toandaccesseverythingelsethroughthe

SOAlayer.Thishelpsimproveflexibility,lower

labortimeandcosts,reducerisk,andoptimize

thevalueofeachcustomer.Italsopermitsthebanktopursueoptimizedpricingbasedona

customersentirerelationshipwiththebank.

Standardizing account openingAccountopeningisacorebankingfunc-

tionthathasbecomeamajorexpense,and,

ironically,apotentiallysignificantbarrierto

businessgrowth.Whiletryingtomaintain

orevenimprovethisservice(afterall,itis

acustomersfirstrealcontactwithabank),

banksmustalsoattempttoreduceitsexpense

strivingforthatelusivegoal:betterserviceat

alowercost.

The business challengeTheaccountopeningprocesshasbeen

hamstrungbyfactorslikelegacysystem

constraintsandduplicateeffortsacross

productlinesandchannels;themaintenance

ofmultipleinterfacesamongmultipleaccount

openingsystemsandapplicationsacross

productlinesandchannels(perhapsthe

biggestsinglecostitem);frequentdisruptions

andalterationsresultingfrommergersand

acquisitionsactivity;andtheproliferationof

regulationssuchasThePatriotActandknow

yourcustomerpractices,amongmanyothers.

Theentireprocesshasbecomepainfulfor

banksandcustomersalike.Pre-salessuffers

fromlowclosurerates,incompletecustomer

views,tellersblurredcustomerfocus,and

ashortageofcollaborativematerialtoease

theprocess.Theapplicationstageisafflicted

bycomplexforms,fewuniformapplicationsacrosssimilarproducts,errorsduetothere-

keyingofinformation,and,again,nosingle

customerview.Theverificationstagelacks

thebenefitofdigitalimagingand,onceagain,

offersnovisibilityintocustomerpatternsand

expectationsinatimelyoruniformway.

Addressingandfulfillingtheserequirementsis

hard,duetonodigitalsignaturecapability,a

lackofautomatedfunding,thehigheradmin-

istrativecostsofpaperletters,andineffective,

disappointingfollow-upforinactiveaccounts.

How it works todayLetsfirstconsidertheplayersandsystems

involved.Rememberthat,inmostcases,there

isacorebankingsystemforeveryproduct

forwhichacustomerwouldopenanaccount.

Also,asmentionedinthepreviousscenarios,

thereareanumberofdifferentchannelsoftensupportedbymultipleapplications.Fulfillment

isusuallyaseparateorganization.And

customersdealwiththedifferentchannels,not

withfulfillmentorotherinternalbankdepart-

ments.Itiseasiesttograsptheproblemand

itscurrentsolutionbylookingattheprocess

typicallyemployedtoopenanewaccount,as

showninFigure6.

Therearesomecriticalthingstonoteinthis

process.First,theend-to-endcycletimeis

hamperedbytheneedtoaccessmultiplesystems,somelegalconsiderationsand

thenumberofpartiesinvolved.Second,

numerousactivitiesarepronetoerrors,

causingredundanciesandfurtherdelays.This

iscomplicatedenoughforanyonebusiness

areaorproductline.Now,considerduplicating

thisprocessforthenumberofotherprod-

uctsthatabankhastooffer.Mostlikely,this

sameprocessisexecuteddifferentlyforeach

productandalso,possibly,variesacrosseach

channel.


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Simplifying the processTheaccountopeningprocessisaclassic

exampleofatechnology-enabledprocess(or,

forsomebanks,the lackofone)impededby

theaccumulatedlegaciesofthefast-evolving

technologylandscape.

Whatisneededhereiswholesalebusiness

processchangewithflexibilitybuiltinto

accommodatefurtherchange.Itiseasiest

tochangeprocesseswhensystemsareat

thefirstpointofcontactwheretheaccount

openingisfirstrequested,andwhenthebank

canaccessthenecessaryinformationand

systemsinrealtime.WhetheritisaCRMappli-

cationoranewaccountopeningapplication,

anysingleapplicationattemptingtocoverthistaskwillrequireextensivesystemsintegra-

tioncapabilitywithinthebanksinfrastructure.

ShowninFigure7istherevisedprocess,

whichassumesthatthebankcanachievethe

levelofsystemsintegrationneededtosupport

therevisedflow.

Thisnewaccountapplicationispossibleonly

ifitcanaccessthesystemsrequired,suchas

electronicformsandcompliance.Thisgoes

beyondtheread-onlyaccessrequiredbefore

finalreview.Ideally,thenewaccountapplica-

tionwoulduseSOAservicestoactuallycreate

theaccountintheproductsystemitself.How

wouldwebuildsuchasystemusingSOA?

Figure8showshow.

FIGURE 6.

General representation o the current account opening process.

CustomerReceive and

complete

Retail/internet

Legal

Compliance

Time

Send ormsto client

Send tobranch withsignature

Receive andreview

Accountprocessingapprovals*

Receive andapprove*

Receive andapprove*

Retail CRMSystem

Receive andreview

Receive andreview

RetailAccountSystem

Fulfllment

Systems

Initialrequest

Retail CRMSystem

Retail CRMSystem

ComplianceSystems

ComplianceSystems

RetailAccountSystem

Send checks,cards, etc.

Account isopened

!

Accountopen

* May cause another round of customer interactions, if data is not valid/compliant.


Repeat until complete



SOA streamlines

the account opening

process; it provides a

consolidated customer

view and more eicient

processing that can

reduce bank costs and

improve customer

service.


13/16


FIGURE 7.

General representation o a revised account opening process using an SOA-enabled application.

Customer

Retail/internet

Legal

Compliance

Time

Collect dataAutomatedvalidations

Final review

Retail CRMSystem

Receive andreview

Fulfllment

Systems

Initialrequest

ComplianceSystems

RetailAccountSystem

Send checks,cards, etc.

Account isopen


New Account Application System

Complianceapproval

!

Accountopen

Exceptions

Core business applications


FIGURE 8.Building or integrating a new account application using SOA services.

Channels

Core bankingapplications



Mortgage andlending applications

SOAservices

Retail

Internet

Post

Phone

Validation servicesCheckforduplicate

accountsAccount servicesFindaccountCreateaccountUpdateaccountDeleteaccount

Create account

New AccountApplication

System


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Thebankwouldbuildalayerofservices

andusetheservicestoaccesstheaccount

managementfunctionalityinthecorebusiness

applications.Asinglesetofserviceswouldbe

built.Aservicetofindanaccountmayactually

haveadifferentfunctionineachcorebusinessapplication.However,therewouldbeasingle

SOAserviceforeachaccountmanagement

function.

Inthisexample,weshowaNewAccount

ApplicationSystemusingtheseservices.This

doesnotalwayshavetobethecase.These

servicescanbeusedbyotherbankapplica-

tionsdirectly.Forexample,theonlinebanking

applicationcouldusetheSOAservices

directly.Thistypeofimplementationsetsthe

basisforfuturereuse,andmoreimportant,ITflexibility.

The value to the bankBankscanrealizeasignificantreturnfromthis

processandthesystemsusedtocreateit.

Aboveall,therevenuegainsfromfocusingon

theprocesscanhelpjustifythecoststobuild

thisreusableapplicationinfrastructure.The

increasedclosureratesonnewaccountscan

yieldnewrevenueandbroadentherelation-

shipbankshavewiththeircustomers.

Therearenumerouscostsavingsforthebusi-

ness,inareaslikedatacollectionanddata

sharing.Thereisalsomoreflexibilityforboth

thebusinessanditsITenvironment,since

a360-degreeviewofthecustomercanbe

achievedwithcurrentcorebankingsystems.

Thisisaremarkablesetofbenefits,and

typicalofSOAinthatitoffersbetterserviceat

lowercost.Usually,technologieshaveoffered

oneortheother,butnotboth.Inthissense,

SOAtriumphsovertheconstraintsoftraditional

economics.

ConclusionBanksmustcollaborateandtechnology

mustbepartofthatcollaboration.SOAoffers

anapproachtobankingpaymentsthatisa

progressivesolutionwithlowercostofopera-

tionthantodaysalternatives.Theinherentflexibilitywouldpositionabankfornew

paymentchannelsandnewpaymentsources

andtargets.

Tosupportmultipledistributionchannels,a

layerofSOAservicesallowsmoreflexibility

forchangeandgreaterproductdistribution,

aschannelapplicationsandchannelsupport

applicationsarenolongertightlylinkedtocore

bankingsystems.AnSOAsolutioncanalso

enabletheopeningofanaccountformultiple

productlinesthatisseamlesslyintegratedwith

multipleback-endsystems.Thebenefitscan

includenotonlylowercosts,butincreased

revenueandoptimizedcustomerrelationships

SOAisindeedrevolutionary.Byexploitingits

capabilitiesinternally,aswellaswithexternal

entitiesofallkinds,institutionscanforgenew

connectionsandsupportnewlevelsofcollab-

orationandinnovation.Thereissimplynolimit

tothenumberofconnectionsandconfigura-

tionswithbenefitsthatpromisetoreshape

notonlyabusinessoranindustry,butawhole

economyeventheglobaleconomy.Inthis

way,IBMbelieves,SOAispotentiallyastrans-

formativeastheInternet.

Butpreciselybecauseofitsrangeandpower,

SOAcanbealittledauntingtotheorganiza-

tionthathasyettouseit.Likeanythingelse

ofthisscale,itmustbeemployedrespon-

siblyandintelligentlywithasenseofvision,

purposeandstrategy.Throughourownuseof

SOAandinthousandsofSOAengagementsacrosstheworld,IBMhasgainedaverygood

senseofhowtoproceedwithSOA:


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Focusonabusinessproblem,anduseSOA

tosolveit.SOAisameanstoanendnot

anendinitself.

Ifpossible,startwithrevenue-generating

capabilities.Forbanks,thismightmean

multi-channelintegrationoraccountopening.

Startsmall.UseyourfirstSOAprojectto

learntheropes.Ifitissuccessful,showitto

otherpartsofthebusinesstodemonstrate

whatcanbedonewithSOA.

Begintobuildnewhumancapabilities.SOA

requiressomespecializedskillsthatentaila

learningcurve.Itisbesttoinstilltheseskills

now.

Thinklong-term.Thehardest,mostprolonged,andmostexpensivepartof

SOAisbuildingtheinitialarchitecture.Once

thatsinplace,additionsorchangesnew

channels,back-officefunctionsorbusiness

linescanbemademuchfasterandless

expensively.Overtime,thereturnonthis

initialinvestmentcanbedramatic.

Whetheryoubuild,buyorevolvetoanSOA

infrastructure,thetimetostartisnow.SOA

canhelpreducetheITinhibitorstochange

allowingbankstocollaboratemoreeffectively

withintheirownfourwalls,amongeachother,

andwiththeircustomers.

About the authorsJayDiMareisanAssociatePartnerwithinIBM

GlobalBusinessServices.Hehasovertwenty-

fiveyearsexperienceinthedevelopmentof

large-scale,complex,cross-organizationappli-

cationsinthefinancial-markets,bankingandinsuranceindustries.Jayiscurrentlythegloba

leaderfortheApplicationInnovationServices

teamattheIBMInstituteforBusinessValue.

Hisrecentlypublishedpaper,Service-oriented

Architecture:Apracticalguidetomeasuring

returnonthatinvestment,presentsaframe-

workformeasuringthebusinessvalueofSOA

investments.Heholdsapatentforsoftware

algorithmsapplicabletodocumentmanage-

mentapplications,andhasdevelopedIBM

softwareproductsinpartnershipwithclients.

JayisanIBMCertifiedITArchitectandacerti-

fiedMasterITArchitectwithTheOpenGroup,

aswellasamemberoftheIBMITArchitect

CertificationBoard.Jaycanbecontactedat

[email protected].

RichardS.MaisaSeniorManagingConsultant

withtheStrategyandChangepracticewithin

IBMGlobalBusinessServices.Hehasover

seventeenyearsofexperienceinabroad

rangeofindustries.Hiskeyskillsincludestra-

tegicplanning,riskevaluation,program/project

management,financialanalysis/modeling,appli-

cationdesignanddevelopment,andvendor

selectionandnegotiation.PriortojoiningIBM,

Richardworkedasanauditor,amanagement

consultantandoperationsdirectorforseveral

companies.Mostrecently,hewasacorpo-

rateriskSVPforaglobalfinancialservices

company.HiscertificationsincludeCPA,

CISSPandCBCP.Richardcanbecontactedat

[email protected].


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GBE03015-USEN-01

The right partner or a changing worldAtIBMGlobalBusinessServices,wecollaboratewithourclients,bringingtogether

businessinsight,advancedresearchandtechnologytogivethemadistinct

advantageintodaysrapidlychangingenvironment.Throughourintegratedapproach

tobusinessdesignandexecution,wehelpturnstrategiesintoaction.Andwith

expertisein17industriesandglobalcapabilitiesthatspan170countries,wecanhelp

clientsanticipatechangeandprofitfromnewopportunities.

Related publicationsDiMare,Jay.Changingthewayindustrieswork:Theimpactsofservice-oriented

architecture.IBMInstituteforBusinessValue.October2006.http://www-935.ibm.

com/services/us/gbs/bus/pdf/g510-6319-01-soa-changing.pdf

DiMare,Jay.Service-orientedarchitecture:Apracticalguidetomeasuringreturnon

thatinvestment.IBMInstituteforBusinessValue.October2006.http://www-935.ibm.

com/services/us/gbs/bus/pdf/g510-6320-soa-roi.pdf

Hedley,Kimberly,JohnWhite,CormacPetitditdelaRocheandSunnyBanerjea.The

paradoxofBanking2015:Achievingmorebydoingless.IBMInstituteforBusiness

Value.November2005.http://www-935.ibm.com/services/us/imc/pdf/ge510-6225-

banking-2015.pdf

Reerence1 Formoreinformationonthesesampleregulations,pleasesee:EuropeanUnion

PaymentServices(acollectionofdirectives,regulations,andrecommendations).

http://ec.europa.eu/internal_market/payments/index_en.htm;BaselII(referstothe

BaselIIFramework).http://www.bis.org/publ/bcbs107.htm;SingaporePayment

SystemsAct(boththeinitialregulationsandsubsidiaryregulations).http://www.

mas.gov.sg/legislation_guidelines/index.htmlandhttp://www.mas.gov.sg/legisla-tion_guidelines/payment_system/payment_act2006/PSOA_Subsidiary_Legislation.

html;EUCreditforConsumers(legislationaddressingconsumerloans).http://

www.europarl.europa.eu/oeil/file.jsp?id=225692;USCheck21(CheckClearing

forthe21stCenturyAct).http://www.federalreserve.gov/paymentsystems/trun-

cation/default.htm;EUSettlement&Clearing(aspartoftheEUFinancialMarkets

Infrastructure).http://ec.europa.eu/internal_market/financial-markets/clearing/

index_en.htm

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IBMGlobalServicesRoute100Somers,NY10589 U.S.A.

ProducedintheUnitedStatesofAmerica March2009AllRightsReserved

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