Among the profound changes to have affected the world of retail banking in recent decades, the most obvious has been the transformation of traditional bricks-and-mortar banking to ‘anywhere, anytime’ banking where banks, empowered by technological innovations, can allow customers to conduct banking transactions through a variety of delivery channels.
The current high levels of competition and customer demand make a multi-channel strategy an essential aspect of progressive banks worldwide.
Enabling customers to conduct banking transactions through multiple delivery channels is not enough, what is critical is the concept of a ‘unified view’. But attaining a unified view is not simple. Historically, banks have been structured along business lines rather than being customer-centred, so customer data is stored in channel-specific silos. Also, because the various delivery channels have evolved gradually over the years, at most banks, each delivery channel interacts independently with back-end systems.
These independent interfaces often result in inconsistent representation of the same information across channels – for instance, if the account balance seen on the ATM is not the same as when checked on the internet or over the phone. Such discrepancies compromise the quality of customer service.
Consistency needed
Banks have realised that customers need to receive a consistent sales and service experience across all delivery channels. They also need to be able to view the same financial information across all channels, so that if a customer withdraws £500 from an ATM, the debit transaction is immediately reflected across all other delivery channels.
Ensuring the real-time sharing of information across delivery channels and integrating channels is increasingly among banks’ top priorities. Analyst Celent estimates that banks can spend anywhere between $5m to more than $70m for channel integration work. Along with ensuring benefits such as superior customer satisfaction, Celent believes this investment is expected to achieve between 10% and 25% yearly cost savings in the areas of IT and operations.
Among the several tools and methodologies that banks are adopting to ensure multi-channel integration, one that is gaining currency is service-oriented architecture (SOA), where data and processes are reused throughout the enterprise by being bundled together in standard interfaces referred to as “web services”. With SOA, loosely coupled pieces of functionality, components, applications or even ‘wrapped’ legacy systems are provided in a way that they can be published, consumed and combined dynamically over an intelligent network.
Access to common data
“To deliver a more consistent multi-channel experience, data, applications and processes can be exposed as services, which can then be reused across the different channels, ensuring that all channels have access to a common set of processes, systems and data,” explains Howard Wassall, Europe, Middle East and Africa North solutions consulting manager at business integration software company TIBCO. Further, SOA enables banks to achieve tighter coordination and integration of their channels so that customer interactions can be managed, tracked and completed across multiple channels. For instance, a customer can initiate an activity such as applying for a loan via one channel and complete it using another.
According to a recent report issued by Aite Group, SOAs will encompass more than 75% of all new development in financial services by 2008. Industry experts agree with this prediction and research from firms such as Forrester Group and Gartner corroborate these findings.
Last year, Forrester surveyed IT decision-makers at 60 European financial services companies in 13 European countries on their current situation and future plans regarding initial focal points for application renewal, key areas in the application infrastructure space, and the status of SOA in financial services. Nearly four-fifths said that their company was already using SOA or would do so by 2008.
Multi-channel integration is one of the key drivers for the use of SOA within banks, says Mr Wassall of TIBCO. Caixa Geral de Depósitos (CGD Group), the largest bank in Portugal, has deployed TIBCO’s SOA solution to achieve a consolidated real-time view of customer information for more than 1000 branches of seven CGD Group companies. Additionally, CGD Group employees can access consolidated records of more than 4.7 million customers in real time, expanding the bank’s customer service capabilities and improving its competitiveness.
Wachovia, the fourth largest bank holding company in the US, has also deployed SOA to integrate its delivery channels. The bank, which has grown via a lot of acquisitions, has disparate applications that can talk to each other using IBM’s SOA solution.
Describing the solution, Wachovia application server competency group manager David Griffes and IT architect Don Donson say: “SOA allows us to skinny down channel delivery applications… we are able to turn silos of applications into an integrated platform where the front end actually talks to a single back-end service. That single service can then display the same information in different ways to customers when they come in to the bank through the different channels.”
Reusability and modularity
Enrico Toson, financial services industry marketing director for EMEA at HP, says: “The two basic tenets of SOA are reusability and modularity. SOA enables a bank to have common services or use services across multiple channels, lowering the overall IT cost for the bank. SOA considers IT resources as composite, business-oriented services enabling a strong business-to-IT alignment.”
SOA and modernisation of applications provides for transforming a legacy environment into one where information is accessible and can be accessed via the web, he adds. HP has been working with the Bank of Baroda, one of India’s largest banks, for its technology-enabled business transformation project. HP is implementing and managing an enterprise-wide SOA for the bank that includes, among others, core, phone and internet banking and delivery channel integration.
Use of standards
The use of SOA helps firms change the way they manage, design and implement IT solutions, says Mr Wassall of TIBCO. “The real benefit is in the use of standards. SOA helps create a standards-based architecture that increases flexibility and lowers the cost of changing business processes such as introducing a new delivery channel.”
Martin Percival, senior EMEA technical evangelist at enterprise infrastructure software vendor BEA Systems, says: “The argument about whether SOA is good or not is concluded.” Wells Fargo, the fifth largest bank in the US, migrated its existing wholesale banking customer portal to a new SOA foundation using a solution from BEA Systems.
The bank built an integrated desktop that provides employees with access to the same data sources, business processes as customers, ensuring consistency between channels and leading to tremendous business growth, cost and operational efficiencies for the bank.
“Multi-channel integration is of immense importance for banks themselves for they can enjoy benefits such as getting a single view of the customer, which eases support and cross-selling opportunities on their end. And while SOA isn’t the only way of integrating multiple channels, it certainly is the most cost-effective and cost-agile way,” says Mr Percival.
