The future of financial services may be banking on SOA

by Hans Tesselaar, Executive Director at BIAN
Publication: SearchSOA

“It is clear that once industry-wide standards are agreed upon, SOA is the best technology for internal and external interfaces.”

Service Oriented Architecture : The future of banking

Recent years have been difficult for the financial services sector. The crisis of 2008 has impacted every corner of the industry, leaving banks with the uphill struggle to unhinge severe doubt in their day-to-day operations – especially in an extremely competitive market in which alternative solutions are beginning to lure customers away.

Market saturation has resulted in the weakening of customer loyalty, exacerbated by the growing presence of new entrants whose modern core systems enable a more innovative value-add service, challenging the status quo of modern retail banking. Simultaneously, banks are under increasing pressure to reduce costs and illustrate greater cost efficiencies across the business. These have contributed to the growing feeling that the financial services industry, restrained by outdated legacy systems and overwhelming IT upgrade costs, needs to deploy other technology options if it is to reduce these high maintenance overheads and promote innovation.

To remain competitive, and given the demanding nature of the many factions they now operate in, banks should remain flexible and quickly respond to market forces on an auxiliary basis. Modernizing legacy software is one option, but integration costs are prohibitive – in many cases the implementation costs are more than triple the purchase costs of the original software, significantly damaging the business case for an upgrade.

This is why it is imperative that financial institutions consider alternative infrastructure. Once industry-wide standards are agreed upon, service-oriented architecture (SOA) is the best technology for internal and external interfaces, given the resulting cost reductions associated with its deployment; combined with standardized protocols, this will result in increased interoperability among IT infrastructures. This, in turn, will open the door for more IT improvement projects, driving savings back into the business.

What’s more, standards drive efficiency. Not every single piece of banking IT needs to be unique, and rival banks realize there is little point in competing on back-office functionality. Instead, many are now choosing to adopt standard packages, retaining their competitive edge by reusing existing software in novel ways.

Read more at SearchSOA