By Dhirendra Tiwari, Director in PriceWaterhouseCoopers
Banks have Traditionally Employed a Systems-Centric Integration Approach
Banks have been one of the early adopters of Service-Oriented Architecture (SOA) and Integration technology such as Enterprise Service Bus (ESB). Why was it imperative for banks to embrace SOA? The diverse enterprise eco-system centered on the core banking platform can easily become very complex with hundreds of interconnected systems built using diverse technology stacks and scattered around different geographical locations. It was either death by a thousand cuts or to adopt SOA, and wisely so, most banks chose the latter!
Case for Optimization in Integration Approach
While the traditional complexity of banking eco-system is still vital and should continue to be addressed; there are new compelling maturing trends in the market that refuse to bow out and are now becoming the game changers that will define the bank of tomorrow.
From an enterprise integration standpoint, banks ought to think skillfully about optimizing their existing integration approach without disrupting the traditional integration setup that has been serving critical business functions and enterprise systems. Though there are many maturing trends, the four which will continue to challenge the status quo are:
Mobile: Based on PwC’s 2015 Annual Global CEO Survey, 93% of BCM CEOs reported seeing mobile technologies as key drivers for Digital Transformation, more than the cross-industry average of 81%*. With the emergence of Mobile technologies and rapidly changing consumer behavior to shift more and more of their activity to their mobile devices, it is critical that banks are able to move from traditional branch-based engagement models, and from distribution models where channels operate in silos, to seamless multichannel models.
Cloud: Hybrid architecture of on-prem solutions alongside adoption of Cloud and Platform-as-a-service is resulting in migration to best-of-breed SaaS solution, leveraging of scalable cloud-based “Data Lakes” for analytics computing, and a need for enhanced security architecture.
Process digitization: With a mandate to manage cost and create operational efficiencies, a rethinking of business functions and processes are creating digitization opportunities in areas such as e-Documents, e-Signature, automated underwriting, and automated Decisioning.
Delivery optimization: Cross-sector competition is forcing traditional organizations to adopt faster time-to-market approach, necessitating faster deployment cycles and more collaboration amongst business, development and operations teams.
While all four trends are interconnected, Mobile appears to be in the front seat of all Digital initiatives.
Mobile and its Impact on Enterprise Integration Approach
Each Bank has its own strategy driven by the customers they serve today, and the customers they want to serve in future. For instance, some banks have aspiration to be a global leader in consumer banking, while others want to continue their stronghold in regional commercial banking market. In this case, the global leader category bank is more likely to be the ‘trendsetter’ in leading the innovation to drive their Mobile banking strategy across all aspects of Customer experience and value chain (i.e. Origination, Servicing, etc.) while the others will position themselves as the ‘trend followers’ enabling selective use-cases for Mobile banking (i.e. Loan Origination). Irrespective of the strategic direction, one thing is clear that Mobile cannot be ignored and has become a priority for all irrespective of their strategy, size and scale.
Some ‘trendsetter’ banks after having established maturity in mobile banking, have now begun to focus on the Omni-channel strategy. Omni(s) (Latin for “Universal”) – Channel is a digital transformation paradigm to provide common customer experience in multiple channels through which a customer interacts with the bank.
Omni-channel implementation path often starts with the convergence of customer facing capabilities in Online, Tablet, Mobile and new disruptive channels such as Wearables; while also developing a transition roadmap to further integrate capabilities such as alerts, notifications, 3600 customer view to other self-service channels such as IVR (Interactive Voice Response), Kiosk, ATM; and assisted channels.
But Omni-channel initiative isn’t just about technology, it’s also changing the way a bank operates internally. We are seeing that business is now getting more involved in decision-making, planning and execution. The initiatives are no longer just technology-driven but they are also business-driven.
This change in dynamics raises an interesting question: How can we effectively empower business teams while not disrupting the delivery of the initiative?
One way to do this is to lay out a separation of concerns plan that decouples business-centric functions from the processes and data that support it. While this works in the implementation phase, what happens when the product is in production? The business would want to continue to enable new functions/features regularly. Which brings us to the need to optimize enterprise integration strategy with a built-in agility in the underlying services that can easily be used to stand-up new functions/features without going through a cumbersome and time consuming implementation.
However, the question that technology team must answer now is, how do we get the agility when most of enabling services are connected to legacy systems that are very difficult and/or risky to change?
While in traditional approach, one would weigh options for an overhaul of key components of Service-Oriented Architecture (such as re-evaluation of established integration platforms, retooling of messaging protocol, refactoring of older services, etc.), the new model is a more inclusive approach that addresses the problem by employing a process-centric two-speed delivery and execution approach, where we let the legacy systems team work at their own pace with their own technology and standards, and now, any system or interface that touches customer lends itself an opportunity to utilize emerging concepts, tools and technologies, thus enabling greater agility with lower executing risk. The process-centric approach provides an opportunity to decouple systems from the business processes and can enable flexible API-led integration to a wide variety of systems/devices on-prem, on cloud or to third-party vendors. The new approach also opens up selective opportunities to speed up deployment cycles by implementing DevOps capabilities such as Continuous Integration.
But, does this mean that the enterprise integration team will have to maintain two separate set of tools, processes, standards and governance?
The answer to this question is not that straightforward because a bank may decide to extend their existing middleware stack by adding newer products by the same vendor, in which case it eliminates the need to maintain two separate tools, however, this approach will limit an organization’s capabilities to adopt best-in-breed solutions. For e.g. A traditional IBM shop may choose not to look at APIGee or MuleSoft because the products are not developed by IBM.
With the fast changing landscape of Mobile technologies coupled with FinTech disruption, implementing a new enterprise integration strategy which is centered on the people, process, governance and technology will equip an organization to embrace the innovation and organizational change head-on rather than playing catch-up and will enable the bank to better serve their customers on any device of their choice. And while the maturity trends may impact only specific line of service or core system (s), the impact to enterprise integration is inevitable.
In separate papers, I will also discuss the impact of ‘Cloud’, ‘Process Digitization’ and ‘Delivery Optimization’ on Enterprise Integration approach for banking.
Annual Global CEO Survey, 2015, PwC (2015).
Dhirendra has over 14 years of experience executing large-scale complex initiatives in Financial Services and currently works for PriceWaterhouseCoopers. He is a TOGAF® 9 certified Enterprise Architect and is also a Certified Scrum Product Owner. He has successfully demonstrated his leadership skills and technology expertise in architecting and implementing complex enterprise systems, designing and implementing DevOps capabilities, implementing Mobile technology & managing SDLC projects. Dhirendra can be reached at Dhirendra.firstname.lastname@example.org