By Jiří Havel, Head of Organization and Management Department, TurboConsult
Nowadays, we are witnesses to a dynamic development of banking entrepreneurship in Europe, despite the fact that some European countries are affected by on-going financial crisis. This development is represented by both existing and newly founded banks and credit unions which offer wider banking products and service offerings to their clients at more advantageous conditions. In such a highly competitive environment, the quality ICT infrastructure acquired for a reasonable price, represents one of the deciding factors of success.
That is the reason why many banks (and other financial institutions) think about their ICT architecture and they are looking for modern scalable solution, which allows them to react on current development in finance very quickly and with cost minimization.
There are different ICT architectures applicable for financial organizations. It is absolutely essential to decide about future architecture before any systems selection and implementation. Systems have differing levels of compatibility with varying ICT architecture making implementation and integration sometimes very difficult and therefore a very expensive task.
Two dominant ICT architectures have recently been used extensively in financial organizations:
- Enterprise service bus architecture
- Central system architecture
Enterprise service bus architecture is based on Enterprise service bus (ESB), which is responsible for communication among ICT solutions operated in financial organization. From a technical point of view, the ESB is a specialized ICT solution designed for message integration whereas (ESB is responsible for obtaining and delivering messages from/to other systems). These other systems communicate with the ESB via WWW services.
Figure 1 – ESB architecture
This architecture is often used in big financial organizations, which operate and integrate many ICT solutions. Many of these financial organizations have more than one core banking system (e.g. different CBS for deposit products, loans, retail clients and SMEs etc.) and it is necessary to integrate them in banks. And, of course all operated ICT solutions must have an interface to the ESB.
This architecture is open for adding the next ICT solutions into a bank’s environment, bearing in mind that all ICT can grow within the bank. On the other hand, the ESB, especially its implementation and maintenance, is difficult and expensive. It is necessary to not only obtain the ESB and connect it with all other systems in the bank, but to also have a dedicated integration team for systems orchestration in the bank. That is the reason why this type architecture is used in big financial institutions only.
Central system architecture is based on one information system (which is often core banking system), a central part of ICT architecture and other systems, if any, are connected to it via proprietary interfaces. The central system is used for the most important parts of financial business (e.g. accounting, evidence of contracts and clients etc.) and other cooperated systems are used for next additional tasks only. This centralization is important as main functionalities are fully supported in the central system and there are only a few, sometimes no other operated systems connected to it. Usually the central system contains not only “standard” core banking functions but it also supports other parts of financial businesses (Internet and Mobile banking, regulatory reporting, approval rules for products etc).
Figure 2 – Central system ELBOS with its functionalities
This architecture is simpler and cheaper, as it is unnecessary to buy and implement an ESB and to integrate all systems to it. Whilst on the other hand, it is more restricted for the following development because it is difficult to add the next ICT solution, as it makes the bank very dependent on the supplier of the central system. This is a normal choice for SME banks and financial organizations.
As previously mentioned, it is very important to obtain such ICT solutions, which fits into a chosen ICT architecture.
A system for the ESB has to be prepared to be part of a comprehensive banking environment, most importantly it must have a well-documented interface for its business logic based on WWW services. Modern 3-tier business architecture with all business logic (and of course data) on the server side is essential. A configuration for central system architecture must have the necessary functions for all ICT support of SME financial organizations – they want to buy (if possible) one solution only.
So what should be done in a situation when the financial organization expects fast growth, such as a small credit union with thousands of clients and limited possibilities for ICT investment but with no future ambitions of transforming itself to a standard commercial bank? Such organizations have to count on the strengthening of ICT support (as part of this transformation) including possibly changing the ICT architecture. On the other hand the prevention of former investment is necessary during this transformation.
In these circumstances it is necessary to obtain a system, which is possible to use in both situations, either as central systems with possibility to ensure main ICT support for the organization or as one production system connected to an ESB via WWW services. The system must have well prepared and tested main functionalities and a lot of other modules for usage by SME organizations. These additional modules have to be connected to the main part of the system via defined interfaces.
In the case of growing organizations these modules (which are prepared for SME) could be simply replaced by heavyweight solutions. Connection between the main part of the system and these modules could be done either directly or via integration tools such as ESB. And because all of the systems are prepared for integration it is possible to implement the replacement without negatively impacting to the whole ICT environment.
An Example of such scalable system is ELBOS provided by TurboConsult Ltd. The system is operated in big banks (TC has got experience with banks, which have 1 mio.clients) and it is connected to the next banking systems via ESB – so, the system is one part of the comprehensive banking ICT architecture. This is possible, because the system has an “integration layer” which encapsulates business logic and this layer could be connected to other systems vie WWW services.
On the other hand, the system is also operated in “starting” credit unions which gives them full ICT support for a reasonable price. In cases of transformation from a CU into bank, the main functionalities could remain, and for other functionalities (DWH, CRM, and approval system) the bank could acquire other special solutions and connect it to the ELBOS. So all ICT architecture could grow with the bank without the necessity to change the core banking system and to migrate main banking data.
Figure 3 – Mixed architecture with central system and special CRM and approval system