Application Architecture Strategies in Retail Banking (Strategic Focus)

This publication has been discontinued on July 19, 2011.

Introduction

Abstract

Introduction

Retail banks have developed complex IT infrastructures which aren' t always suitable to meet new demands in the changing competitive environment. Datamonitor believes that banks require new application architectures that will meet operational requirements for at least 10 years, allowing them to amortize their investments and to first embrace and then leverage upcoming technologies and trends.

Scope

*This report examines the reasons behind why retail banks throughout the world are seeking to enhance existing application architectures.

*This report examines the application architecture strategies available to retail banks, but avoids assuming a ' one-size-fits-all' approach will work.

Highlights

Banks are revisiting application architecture strategies in light of changing operational requirements. Many of the world' s retail banks have unintentionally created complex application ' landscapes' , often with a minimal degree of integration and an over-reliance on ' silos' for specific functions.

Legacy integration infrastructure struggles to deliver efficiencies in modern retail banking. The transition to a customer-centric, multi-channel approach represents a development where institutions must move to a more flexible and streamlined integration architecture if they are to remain competitive.

Developing a seamless multi-channel experience for customers requires a fully integrated infrastructure. SOA provides the most flexible and cost-effective solution to achieve this aim. The combination of SOA-enabling future internal IT infrastructure and the selective use of SaaS is an optimum application architecture strategy for retail banks.

Reasons to Purchase

*Gain insight into the challenges faced by retail banks seeking to develop their application architectures.

*Understand the technological evolution of application architecture and the level of SOA penetration in the world' s retail banks.

*Gauge how market conditions are influencing application architecture strategy, including the use of hybrid SOA/SaaS models.

Table of Contents

Overview 1
Catalyst 1
Summary 1
Key Messages 2
Banks are revisiting application architecture strategies in light of changing requirements 2
Legacy integration infrastructure struggles to deliver efficiencies in modern retail banking 2
SOA is a key approach for retail banks to adopt 2
A SOA/SaaS hybrid delivers a modern, flexible application architecture strategy 2
Table of Contents 3
Table of figures 4
Table of tables 4
Market Opportunity 5
The retail banking environment is at its most challenging in living memory 5
The effects of market conditions on technology spending 5
Understanding application architecture and enterprise architecture 5
Defining enterprise architecture 6
The challenges faced by retail banks looking to develop their application architectures 6
Customer experience management and channel infrastructure 6
Internet sales and service 7
Branch sales and service 7
Contact center sales and service 7
Marketing 7
Customer decisioning 7
Customer proposition development and product infrastructure 8
Credit risk and impairment management 8
Industrialization is an underlying driver for application architecture strategy in retail banks 8
Technology Evolution 9
Understanding the traditional approach to application architecture in retail banking 9
Legacy integration infrastructure struggles to deliver efficiencies in modern retail banking 9
Traditional integration methods result in complexity, lack of scalability or expensive integration 10
Point-to-point integration creates costly complexity with multiple applications 10
Hub and spoke integration is more manageable but suffers from bottlenecks and a lack of scalability 11
Message bus architecture allows a scalable solution but proprietary requirements make it expensive 11
The role of the mainframe 12
The implementation of multi-tier architecture has created problems for retail banks 13
Remedial action must be taken by retail banks in order to improve the application architecture 13
SOA is a key approach for retail banks to adopt 13
The role of SOA 13
SOA using an ESB reduces complexity and provides a more flexible and cost-efficient approach 14
Applications are connected to the ESB through smart adapters 14
The use of web services standards 15
The level of SOA penetration in retail banking 15
The role of Software as a Service 15
Customer Impact 16
Market conditions are dictating change in application architecture strategy 16
The impact of SOA and SaaS on application architecture strategy 16
Illustrative examples: SOA-enabling IT infrastructure and the selective use of SaaS 17
SOA-enabling IT infrastructure 17
The selective use of SaaS 18
Go to Market 19
Understanding the appetite to invest in SOA 19
Vendors' go-to-market strategies need to be refined for a more widespread uptake of SOA 19
Vendors need to develop more non-IT material for demonstrating the benefits of SOA 20
Lower-pitched marketing material will help business management understand SOA 20
Parallel systems that help demonstrate ROI will be useful for IT management 20
SOA approaches customized to the vertical market will help retail banks to differentiate between vendors 21
Recommendations 21
Have a SOA ROI model that is both accurate and easy to understand 21
Banks will be interested in technologies and business models that help stretch operating budgets 21
Ensure any discussion on application architecture strategy has a distinct business flavor to it 22
APPENDIX 23
Definitions 23
Acronyms 23
Banking tiers 23
Methodology 24
Further reading 24
Ask the analyst 24
Datamonitor consulting 24
Disclaimer 24
List of Tables
Table 1: Return on investment (ROI) calculation for measuring SOA benefits 21
List of Figures
Figure 1: Enterprise architecture hierarchy 6
Figure 2: Industrialization as a key driver in application architecture strategy 8
Figure 3: Point-to-point architecture 10
Figure 4: Messaging bus architecture allows scalability but can suffer from high costs 12
Figure 5: ESB uses open standards to integrate applications on different platforms 14
Figure 6: High-level application architecture strategy of a Tier 1 retail bank 17
Figure 7: Area of investment for single biggest IT project in current budget year 19

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