The Banking Industry Architecture Network (Bian) has called for the adoption of a service-oriented architecture (SOA) framework across the banking and industry and its software and services suppliers to support the move to off-the-shelf software in banks.
Bian, which promotes a common banking architecture, has created a framework for software suppliers to create systems compatible with a bank’s SOAs.
If adopted, banks will be able to buy any Bian SOA-compliant software off the shelf, in the knowledge that it will be compatible with their infrastructure and will not require a major integration project.
Bian has launched SL 1.6, which it describes as a blueprint for banks to develop architecture roadmaps that support flexible integration in existing IT systems.
The standardisation of software using a SOA framework will enable cloud software suppliers to produce applications compatible with bank architectures.
According to research from Bian, 100% of banks believe SOA standards will help them compete.
SOA in banks
Steve Van Wyk, CIO at ING Bank and chairman of the board at Bian, said that, in the past, banks created SOAs for their own infrastructures to increase re-use and reduce integration of their own applications.
But as banks increasingly buy software off the shelf, there needs to be an industry-wide SOA standard so they can integrate third-party software easily.
SOA frameworks break bank architectures up into services and define what data and integration these services require. In the past, if software was brought in from a third party there would be a large integration job.
“If the software is Bian SOA framework compliant it will be plug and play,” said Van Wyk, adding that a lot of time and energy is normally spent on integration.
The survey of 24 Bian members, including banks and suppliers, also revealed that 78% believe SOA standards will reduce IT costs by 25%. A massive 44% expected savings to be as high as 50%.
Van Wyk said ING is trying to get most of its environment onto a Bian-compliant SOA: “We are trying to get suppliers to adopt the Bian framework.”
Banking opportunity for software suppliers
He said suppliers should see this as an opportunity as banks move away from in-house developed applications, said Van Wyk.
“There is no reason why we would want to build ourselves when we can buy off the shelf and plug in," he said.
Banks are moving away from in-house development and towards commercial software to save money. There are many potential savings and banks comprise emerging markets for packaged software suppliers.
According to SAP, only 18% of banks' total software expenditure is external. For banking-specific apps, this drops to 5%, and for core banking software the figure is even lower.
According to Gartner, banks spend about 6% of their revenue on IT. This compares with the retail and wholesale sectors, which spend 1.1% of revenue on IT; utilities, at 2.8%; industrial manufacturing, at 1.8%; and a sector-wide average of 3.6%. The only sector that spends a larger proportion of revenue on IT is the software and internet sector, at 7.6%.
Suppliers such as Microsoft, SAP, IBM and Sungard are already using the Bian framework.
Bank cloud strategies will benefit if suppliers create software to industry standards, said Van Wyk.
“If you want to use cloud-based software, you can buy Bian framework-compliant products that will work without integration,” he said.
Hans Tesselaar, executive director of Bian, said: “The first six months of 2012 have been busy for Bian, forming alliances with other industry standards and bringing onboard new members.
"In parallel to this, the working groups have been very busy defining the Service Domains. Keen to demonstrate tangible benefits, we’re delighted to launch this new Service Landscape.”
Standardisation needs cooperation
He said banks need to work together if they are to move forward.
“SL 1.6 represents a significant evolution of Bian’s core content,” said Stephen Lindsay, head of development of Swift Standards and chairman of Bian’s payments working group.
“From a payments working group standpoint, we were able to share input and gain insight from a greater range of experts than with previous releases, due to Bian’s recent growth.”
Chris Skinner, CEO at financial services think-tank Balatro, said Bian is not the first example of a standardisation group created by suppliers and banks.
“We have seen industry groups created and disappear before,” said Skinner.
He said the banking industry is moving towards standardisation but not necessarily SOAs.
“There is an emergence of cloud and HTML5 based services,” said Skinner.
Read more on Service-oriented architecture (SOA)
All bank staff will have to understand APIs as the industry transforms
Dutch privacy watchdog tells banks not to use customer payment data for marketing
People that have never heard of the cloud enjoy cloud services, so why should open banking differ?
SAP extends Hana’s reach beyond enterprise applications