Tuesday, April 22, 2014

Facilitating Core Banking Transformation Through BPM and Rules

This is a guest blog entry by Scott Simmons of IBM. Scott is the BPM Solutions Architect for the Banking and Financial Markets.

Faced with aging systems, banks are reaching decision points in terms of buying a packaged solution or building/extending their existing core banking solutions.  Often banks find that packaged solutions will not meet the needs of the bank and opt for a transformation approach based on their existing solutions.  Using BPM and rules, organizations can extend existing core banking applications and not have to sacrifice the intellectual capital that is part of their current solution.  We often find that this is done in conjunction with (often) a service middle-tier normally implemented with an ESB.  As the BPM and Rules/Events technologies have evolved over the last few years, this approach has become a common and well tested pattern enabling banks to iteratively replace portions of the system while still providing key core banking functions to the business.

If we review how process and rules can be used to extend an existing solution - let's take retail lending as a key application.  In the legacy situation - Retail Lending is normally a set of COBOL programs residing on the mainframe.  In the current regulatory climate - this is an impediment to change as the 3GL solutions are not very flexible.  In short, it becomes increasingly difficult to modify code on an continual basis.  Equally important, when we need to introduce new functionality such as mobile, social or analytics functionality - this often requires code modifications as well.

So let's consider another approach.  First, understand that retail lending provides a number of high level business functions comprising multiple processes such as loan origination, loan servicing and loan closure.  We can model and simulate these functions quite easily without the need for direct code development.  The process flow logic and underlying validation/calculation activities can be modeled as decision services (e.g. rules and events).  The process flows can invoke atomic and composite services such as receive loan applications, check credit, approve loan and other key functions which in turn, provide interfaces to the operational systems.  As a result, we see that a process and decision management approach (based on a loosely coupled service design) provides a foundation to extend current core banking applications (e.g. to deal with regulatory change) and to introduce new business functionality more easily and rapidly than traditional 3GL development.  We see this approach being adopted as a key pattern to address the challenges of aging core systems in the face of ongoing market and technology changes.

We see our clients normally initiating these types of transformation projects through top-down process and rules discovery. The discovery process enables business architects to use process modeling tools and techniques to identify and decompose key business functions and requirements specifications.  One of our clients uses IBM Blueworks Live to map 1000s of key processes many of which become implemented as functions on existing core banking solutions.  Although business process and rules management can be undertaken as strictly a discovery exercise with a tool like Blueworks Live -- many tools provide the ability to develop and implement solutions.  These development tools  often provide for rapid prototyping and solution implementation facilitating collaborative design and development between business and IT stakeholders.  This capability is a key functionality of the IBM BPM and Decision Management solution offerings and is a key reason for their use in numerous banking transformation projects.

Interested in hearing more?
Next week at IBM Impact, Scott will be hosting a session titled: Raise Expectations for the Always-on Enterprise
Session Number: BTA-1221
Date/Time: Thu May 1; 10:30 a.m. – 11:30 a.m.
Location: Marcello 4503

Scott Simmons is the Banking/Financial Markets Solutions Architect for IBM’s NA Business Process Management Solution Architect team. Scott specializes on the design, development and implementation of BPM solution architectures with a focus for banking/financial markets customers. Scott has deep experience in the areas of Service Oriented Architecture and Enterprise Modernization and is a Certified SOA Solution Designer.