SOA Taking Hold in Banking

By Allen Bernard

(Back to article)

For years, large banks, many of which have grown by acquisition after acquisition, have been struggling to find a way to cut through stove-piped infrastructures designed to support just one or two business units.

They've adopted enterprise services bus (ESB) technology and introduced enterprise application integration (EAI) strategies as well as other integration efforts, but these, as often as not, have fallen short.

To offer the new services and responsiveness their customers now demand, as well as cut costs and redundancy, big banks are adopting SOA. If successful this time around, banks will be able to use and reuse customer data without having to maintain multiple databases that contain, essentially, the same information.

They will also have the agility they need to meet ever more stringent and changing regulations, said Donald Hanson, worldwide sales manager for IBM's Banking Industry Solutions division.

"The (banks) that are most mature, are the ones being driven by business imperatives to actually create more enterprise resources," he said. "What I see when I meet with technology executives, is pressure from the business to, of course, do more with less — which has always been the case — but now, the business is asking for common types of services to support the use of those services across the enterprise."

Process Improvement

For now, the low hanging fruit are common activities that most every business unit in the bank uses. Things like account opening that sound simple enough but often — if you want to do more than opening a checking account — have to repeated to get a mortgage, a car loan, do brokerage business with the bank, etc.

"New account opening is one of those core, common services," said Darren Wesemann, CTO of SunGard, a banking services and software provider. "That is not a unique component, but it’s a component that really helps traffic cop, I guess you can say, all of the data. Because what new account opening does is the origination of common data."

And this is where banks — like most businesses — can really benefit from SOA: the reuse of common data to foment multi-channel integration, said Guillermo Kopp, executive director and global research fellow at the Tower Group.

But this is still the dream. Banks are still focusing on using SOA vertically to cut down on redundancies and streamline processes within business units. A good, and necessarily small start, but to really reap the benefits SOA has to offer banks have to move beyond the silo.

"Never mind how much alignment at the business process level," said Guillermo, "if you don't get a common platform of data, if the bank doesn't have a complete representation of the different data elements that make up your relationship with the bank, it's pointless."

But not futile. Starting small is the only way to get to bigger things, said SunGard's Wesemann.

To do anything more and you're probably going to have turf issues. And, as is often the case at large organizations, you have multiple IT departments supporting different divisions and all doing things their own way. To break down these barriers in one fell swoop would be to difficult and costly.

"In general, what we see the successful banks doing is they definitely start very, very small," he said. "New account opening is a good example and it almost doesn't matter because as long as you can start small … in terms of (data) reuse, then they tend to be more successful."