October 10, 2012

SOA, standards and IT systems: how will SOA impact the future of banking services?

A report looking into the attitudes of the banking community, with a focus on how the adoption of Service Oriented Architecture in financial services IT systems will create tangible business benefits for both banks and software vendors

Key findings at a glance

• 78% of banks believe the adoption of a service oriented architecture will result in a 25-50% reduction in banking IT costs. 56% of vendors are confident that SOA standards will reduce these costs by up to 25%

• 100% of banks state that the adoption of SOA will increase their institution’s ability to compete in the current market. 100% of banks also said that SOA will be the dominant accepted future banking architecture

• 78% of banking respondents stated that reduced IT costs will increase their competitive advantage as a direct result of SOA adoption

• Software vendors identified a number of business benefits of SOA adoption, including: the ability to re-direct IT to other value added service; increase in bank product offerings and increased innovation; increased enablement to bring products to market faster; reduced integration costs

• 89% of the bank ecosystem has either already started or finalised the process of SOA implementation

• 100% of software vendors envision an ‘AppStore’ for banking functionalities in the future.

• 76% said they envisage this option within 10 years, with half of these expecting this to be available within the next 5 years

Why are banks choosing SOA?

Service oriented architecture (SOA) refers to the frameworks and processes that enable application functionality to be provided and consumed in sets of services relevant to specific business functions. It is often described as the offering of a catalogue of ‘building block’ banking functionalities, which allows non-technical bankers from the business side to pick and choose existing functionalities in order to build new products. SOA is gaining increasing popularity among financial services enterprise architects as it encourages fusion between the business and IT needs of a bank. It is widely accepted that the adoption of SOA technology within the financial services industry will result in:

• lower banking IT costs as a result of decreased integration costs
• increased capability to compete in the modern market
• increased speed-to-market of new products
• increased opportunity to provide value-add services to banks’ customers

This report presents the findings of a survey looking into the tangible and anticipated benefits of SOA adoption in the financial services, using BIAN’s community of banks, software vendors and service providers and integrators.

SOA standards and banking IT costs

Banks overwhelmingly agree that the adoption of SOA standards will result in a reduction in IT costs (see figure 1). The majority (78%) of those questioned believe that adopting this framework will result in a 25-50% reduction in banking IT costs. No banks believe that SOA standards will result in an increase in costs — although 22% did suggest that the reduction in cost may be just 5%. Predictions from software vendors on the impact of SOA adoption on banking IT costs were far more varied (see figure 2). 56% of vendors are confident that SOA standards will reduce these costs by up to 25%, but 22% did suggest there may be savings of just 10%.