Leading banks are pressing IT suppliers to take-up open technology standards, in a drive to reduce the cost and complexity of banking technology.
Deutsche Bank, ING and ABN-Amro are among a dozen international banks leading an initiative to introduce open standards in banking IT.
The banks claim that common standards between IT suppliers that provide software as a service (SaaS) could reduce bank IT integration costs by up to a third, and dramatically reduce the likelihood of IT projects running over budget.
The banks are part of the Banking Industry Architecture Network (BIAN), a non-profit organisation, which aims to develop standards to simplify banking technology.
Integrating IT services from different suppliers is a major challenge for most banks, which can run as many 9,000 different software applications, Hans Tesselaar, a director at ING and executive director at BIAN, told Computer Weekly.
The lack of compatibility between banking IT services from different suppliers, and lack of transparency from suppliers about the capabilities of their technology, can often lead to cost over-runs on banking IT projects, said Tesselaar.
“People start work on core banking processes and, before the end of the project, the cost can be double or triple the original amount of money, because it is not clear from the supplier what their capabilities are and how to adapt,” he said.
Download resources on Banking IT
BIAN is developing descriptions and standards for over 200 processes used in banking, which will make it easier for banks and IT suppliers to understand each other’s technical capabilities.
“If someone says I can provide you with a core banking system, the bank has an idea of what the core banking system can do, and the supplier has an idea of the needs of the bank,” said Tesselaar.
Interoperabiity of IT services in banking will become increasingly important as banks move away from single suppliers towards multi-supplier environments, BIAN claims.
The days of banks making £1bn investments in core IT systems are over, which means that IT suppliers that adopt open standards will be at a competitive advantage in future, he said.
The project has gained traction with IT suppliers IBM and SAP, which have produced case studies to show where their IT services match BIAN’s open standards – and just as importantly, says Tessalaar – where they don’t.
Although banks are wary of moving confidential data into cloud services, there is growing interest from banks in buying-in secure IT services from suppliers, rather than duplicating them in-house.
Banks are looking for suppliers to deliver SaaS through secure private and hybrid public-private cloud services, rather than shared public services, said Tessalaar.
One major bank plans to begin migrating to BIAN’s open standards from 2014, Tessalaar revealed.
“That is extremely ambitious. You have to have an extremely clear knowledge of your assets, what you want to keep and what you want to replace,” he said.
Read more on IT for financial services
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?
The obstacles to software-as-a-service adoption in banking