The arrival of Open Banking will bring a transformational change to banking. Banks will no longer ‘own’ their customers’ data – taking away their long-held status as ‘one stop shops’, and will opening up this information to third parties who will use it to provide new and innovative products and services. This more modular approach to banking will give customers new ways to move and manage their money. Behind the scenes, banks are grappling to facilitate this third party access to customer accounts via APIs – easier said than done, for large organisations who are having to completely re-think how individual applications are incorporated into a broader stack.
Legacy limitations mean that operations often remain siloed across different functions. The result is a bit like comparing a modern city to an old town, which has outdated infrastructure, a lack of enterprise hygiene – and bad connectivity.
There are some major challenges that banks must tackle in the quest for agility: every application has its own specific scope and boundary, and every point-to point connection is unique. As a retail bank’s application portfolio grows to several hundred overlapping systems, it is not surprising that adding or enhancing any system becomes an exercise in tracing these highly complex dependencies, which is often unclear as they sprawl across a system. The analogy around banks’ ‘spaghetti systems’ is a little tired, though still an accurate image as we think about tangled and tricky to trace technologies tumbling across the enterprise.
Where do we come in?
BIAN’s (Banking Industry Architecture Network) goal is to provide best practice architecture; a standardised planning blueprint that banks across the globe can use to help them navigate the changing landscape. This map is designed to help CIOs and IT teams measure and map their current model against an ideal world, future-fit architecture; one that allows for reduced costs, improved processes and increased opportunities for innovation across lines of business.
One of BIAN’s priorities is ensuring that the CIO has a very clear idea of which business functions in the bank have scope for more automation; which siloes can be broken down and where data can inform strategic decisions to allow the bank to reduce operational overheads and free up capacity, without incurring significant capex. At the core of BIAN’s proposition is the adoption of a capability-oriented approach to architecting the systems that support the bank, rather than the prevailing “process–centric” design.
Competition is rife – and rivals are free from legacy Infrastructure
Today’s financial system has evolved over decades, and little has changed with respect to the involved business entities and their functions within the financial system. This has to change. Evolving customer demands coupled with technological advances are now challenging traditional business models – including the historically assumed building blocks of banking, and therefore banks’ value proposition.
From small FinTech firms to tech giants muscling into the payments space, competition is rife. For most of these emerging players, tech is in their DNA and they are unencumbered by limiting legacy infrastructure. This competitive edge cannot be ignored. To compete, retail banks must draw on their decades of sector experience. The scale of the apparent challenge is daunting, but failing to capitalise on expertise and strong existing global customer bases, would be a great loss.
The need for change can most effectively be summarised as a fundamental shift in mind-set from a ‘product and services first’ approach, to a focus on understanding the specific wants of the customer, and how these needs can be fulfilled. The customer is the heart of the onion, encircled by banking products, services and capabilities, all engineered around them. BIAN aims to help simplify what can look like a steep mountain to climb, with practical frameworks and a global network of expert members to share experience and knowledge.
BIAN - in practice
Successful development and implementation of API-based technology is a long-winded and costly task for banks to undertake alone. To combat this, some banks have started acquiring fintech businesses to quickly bolster their own service offerings. However, for maximum benefit, industry-wide collaboration around this innovation is needed. This will require banks to shift from a historically closed-off, competitive mentality, to recognising the advantages of pooling knowledge and raising standards of industry innovation together.
Our global membership base of some of the biggest, most innovative banks and technology vendors have combined their industry expertise to define a revolutionary banking technology framework that standardises and simplifies core banking architecture. It is based on service-oriented architecture principles and fosters industry collaboration to provide a future-proof solution for banks. Together, we are dedicated to lowering the cost of banking and boosting the pace of innovation in the industry.
The BIAN standard can be applied/interpreted in all technical implementation environments and used in two key ways – either as a high level design specification for targeted solution implementation; or to define a stable enterprise blueprint for business and technical planning and analysis.
As banks grapple with APIs, one of the simple ways in which this can be used is to identify every application in a bank’s portfolio and map it to the BIAN service domains in our enterprise architecture management tool. This allows for an easy view of which systems are providing similar or overlapping capabilities. From there, it’s a simple step to create a bird’s eye view of your organisation’s business capabilities, identifying compliance, costs and obsolescence challenges.
Adopting a common IT framework would allow the banking industry to launch services faster, cheaper and better meet customer demands for smarter and more transparent services. As time goes on, more complex API functionalities will be built, allowing banks to not just incorporate more exciting services into their offering (e.g. WhatsApp payment), but also establish novel ways to maximise new and previously untapped revenue streams.
As the introduction of higher standards for global banking services grows, the industry will eventually move away from competing on service offerings to competing on brand value. Like we have seen in the retail industry, the winners in banking will be those that provide the right mix of innovative offerings as well as premium customer service.
Hans Tesselaar, Executive Director, BIAN
Image Credit: Centtrip