Bankers are becoming more comfortable using advanced programming technology, but they are realizing that they must come up with standardized ways of expressing critical banking terms.
For example, in a recent system-integration contest, several vendors failed to notice that some systems expressed interest rates in percentage points, and others used basis points.
Bank of America Corp., which hopes to use service-oriented architecture to create a single, automated credit approval system to replace the 11 it currently uses, has found that its business units have different ways to refer to very basic banking terms.
John Schmidt, a senior vice president at the Charlotte company, said the differences in terminology have not been a problem in the past, because each unit has its own lending and approval software. However, one of the “challenges” it has in developing a single system “is having a common business language,” he said. “Even if there’s not much difference between these products, the language they use to describe them is different.”
Each of B of A’s “decisioning engines” is specific to an individual product (such as credit cards or home equity lines) or an individual channel (such as online banking or indirect lending).
“To a large degree, the technological issues” for developing a single system “have been solved,” Mr. Schmidt said. “It is more of a business issue now. We still have lines of business, different functional groups, still operating in silos.”
SOA lets developers use standardized core software to create, say, a basic lending approval module that can be customized for each business unit’s needs. The approach is considered an advance over the traditional one of creating separate software for every unit — the approach that gave B of A 11 lending systems.
Jim Adamczyk, a senior executive at the consulting firm Accenture Ltd., said defining common terms is becoming increasingly important as banks and their customers link their systems for automated data processing.
“If we don’t agree what an interest rate is, if we don’t agree what a customer ID is, if we don’t agree what duration is, then we don’t necessarily have common ground,” Mr. Adamczyk said.
Several other banking technology projects have underscored the importance of using standardized terms to describe individual data elements, in projects using SOA or new programming methods.
Swift, the Society for Worldwide Interbank Financial Telecommunication, said last month that it has set up a closed-user group in conjunction with the International Swaps and Derivatives Association Inc. of New York. The group is meant to promote the financial products markup language for hedge funds and money managers as an industry standard for communicating with their banks about financial swaps, derivatives and other complex structured products for automated processing.
FpML is a variant of XML, the widely used programming language.
Federal regulators are mulling the use of another language, the extensible business reporting language, for a wide variety of financial filings. Regulators, which began requiring XBRL this quarter for financial companies’ quarterly call reports, say that filings submitted using the language can be processed faster and with less errors.
After developing a messaging protocol to provide automated transaction processing for its worldwide trading network, JPMorgan Chase & Co. said last month that it would offer the technology to the market as open-source computer code, called advanced message queuing protocol, to enable computer systems to work together, even when they use different service architectures.
All of these projects use common data tags to define the data elements.
Accenture ran a system-design contest at a Boston “global integration summit” in May sponsored by an industry group called the Integration Consortium. The challenge, based on a project by a real lender, whom Mr. Adamczyk would not identify, was to design an automated system to draw data from various computerized services for mortgage underwriting — verifying the borrower’s personal information, determining the credit score, selecting appropriate products and pricing, and preparing the documents for the loan closing.
Rather than using a proprietary rules engine to design their workflow, seven of the nine contestants used business process execution language, another dialect of XML, Mr. Adamczyk said.
All the contestants finished designing a system within the 24-hour deadline, even though a set of high-risk product and pricing requirements was added midway through the exercise. The curveball was meant to reflect real-world cases in which customers request modifications to projects already under development.
Several vendors erred, though, in their data handling. Some of the applications expressed interest rates in percentage points, while others used basis points, and the vendors whose designs failed missed the difference between 6.75% and 675%.
Mr. Schmidt, who also chairs the Integration Consortium, said the winning vendor was the most disciplined in approaching the project.
“The analyst religiously followed the process,” he said. “The process flushed out the problem.”
Other financial companies are using service-oriented architecture to build multiple, interconnected systems.
James W. Sizemore, a senior vice president and the chief information officer of Fiserv Inc.’s Information Technology Inc., said SOA was invaluable in designing health savings accounts for the fledgling industrial loan company Blue Healthcare Bank. Blue Cross and Blue Shield Association, the trade group for the independent Blue Cross and Blue Shield health insurance companies, plans to open the ILC this month.
The account-opening process, which involves credit processing, card procurement, core processing, data management, and numerous other services, draws on 15 business units of the Brookfield, Wis., vendor, he said. However, “that enrollment is going to appear to be one process, where it is actually 12 to 15 services coming together.”
Peter Kastner, a vice president and research director at Aberdeen Group Inc. of Boston, said that financial companies are increasingly using SOA for a variety of applications.
“It’s the hammer of the moment, and there are a lot of nails to be whacked,” Mr. Kastner said.
