by Hans Tesselaar, Executive Director of BIAN
Publication: Business Value Exchange
With the global financial crisis rocking the foundations of the financial sector in 2008, scandals impacting trust in the system, smartphone dependence surging and FinTech newcomers taking advantage of all of the above to challenge the industry, it’s no surprise that traditional banks are feeling the strain.
In times gone by, the banks sat comfortably in their dominant position. Customers were happy to carry on banking the way they always had done and banks were more than happy to provide that same familiar, traditional service. But against a background of disruptive technology, such stagnation is no longer in line with the demands of today’s banking customers. Well aware of the need for innovation, banks have tried to adapt fast – layering new technology on top of existing systems. The problem: banking IT architecture was developed in a pre-internet era. It cannot cope with the demands of modern banking and only serves to become a vaster tangled web of systems and updates as new technology is layered on top.
As a consequence, many banks have suffered reputation damaging IT outages – leaving customers unable to access their online accounts or make digital payments. However, if banks were to try and completely overhaul their systems in one go, the situation would be much the same. Such an overhaul would likely put some banking operations temporarily on hold, while costing many millions.
These growing issues led to the development of the Banking Industry Architecture Network (BIAN) in 2008. The not-for-profit comprised of banks, technology experts and academic partners, have since worked to develop an internationally standardised architecture design to be put into practice at banks across the globe.
The network recently finalised this model, named Service Landscape 4.0. The framework defines the standard business capabilities that make up a bank, such as payments, loans or trading facilities and groups them into service domains. By identifying more than 2000 information dependencies between them (known as Service Operations), the model categorises business operations and their subsequent technology requirements. This allows for grouped updates on systems, rather than taking a broad brush approach that disrupts the whole core banking system.
With banks facing pressure from numerous directions at present, they are beginning to understand that competing on core banking functionality is not the way to a successful future. By working together to define the future of their core banking architecture and build a standardised model across the industry, banks can concentrate on competing in the areas that matter, such as providing an improved service to customers.