by SAP AG
Agility and architecture don’t seem to go together too well at first sight: Architecture is strong, steady, sturdy — built to support critical banking applications. But the future of banking lies in agility — being able to respond to the needs of customers quickly, guided by the lightning-fast analysis of huge amounts of data. How can these needs be reconciled?
BIAN believes the answer lies in standards. If the software architecture of banking is standards-based, the time currently spent creating many individual, bank-specific solutions for universal problems can be spent instead on differentiation.
Banking has been slow to standardise its architecture, relative to other businesses — right now almost all banking architecture remains internally developed and proprietary. However, this is a tipping point: new technology in core banking and the push to develop new capacities in mobile and cloud services, among other pressures, mean that a wave of modernisation is about to hit — and bring with it the opportunity to move to standards-oriented architecture.
The opportunity is not just in simplification and standardisation, but also cost: as soon as an industry moves to standardised architecture, its IT costs start to come down. Early adoption of standards, through regulation or necessity, means that the food and beverage processing and energy industries, for example, spend 1-2% of their revenues on IT.
Banking is still spending 6.5% of revenues, on average — an unsustainable high proportion. The sooner banking architecture starts to standardise, the sooner that number will fall.
BIAN believes that by 2014 most banks will have adopted best practices. Its banking members will be enjoying the cost and efficiency advantages of architecture that is standards-compliant, and can therefore be installed and serviced by external contractors. This will enable them to target IT funds where and when they are needed, instead of maintaining a “standing army”of internal staff.
Co-operation and co-innovation will not mean the end of competition: nobody would say the market in Android phones was not competitive! Instead, banks will be able to focus attention and expense on making the best implementation — the set of services and experiences that customers want.