Business-rules engines that guide automatic decisioning in banking software have long proven their advantage, with labor cost savings and better time-to-market outcomes evident for almost two decades.Those rules only maintain their benefit, however, if changed to fit evolving business strategies, compliance mandates, auditing procedures and organizational structure. A new product line could be a noose to a growing firm with static BREs.
That's why vendors providing these tools to banks, credit card firms and insurance companies are developing more sophisticated rules engines, labeled business-rules management systems, which can adapt changes across the enterprise, and most importantly, with a minimum of technical assistance from the IT department. JPMorgan Chase, for instance, recently adapted a revamped legacy Bank One BRMS tool for its credit card division to quickly shape new marketing efforts to credit policy changes.
"Our business partners now have the ability to change rules on the fly, without initiating an IT project," says Tom Maillie, development manager for rules engine and decisioning technology. "The second benefit is that by using technology, it creates a whole directory path and auditable trail on what all the rules are and how they were enforced."
JPMorgan Chase uses JRules from ILOG, one of four major vendors tailoring rules engine products for the financial services industry.
The use of business-rules engines within IT applications dates back more than a quarter century to the simplest equations that could pick out a customer's potential gold-card status or sweepstakes eligibility. Their increasing use in CRM, anti-fraud, credit-scoring, compliance and identity-verification applications has produced new demands from bankers looking to sell, downsize, brand or audit more efficiently. But the complexity of changing rules in old systems across departments, platforms and locations has been vexing, particularly because of the heavy use of IT personnel to reprogram embedded rules engines.
The new type of business rule repositories are accessed through desktop PCs and written in plain business language, rather than complex programming language.
Despite their ease of use, these products are still awaiting widespread adoption in banking, but that may change as related industry associations, credit card issuers, and data firms swarm to BRMS, according to Celent analyst Ariana-Michele Moore. Moore recently documented a case study of a JRules implementation for Equifax, which designed its new InterConnect decisioning platform to handle application demands for 700 licensed users, including banks. The new product allows custom rules writing for ID verification, risk assessment, compliance and credit-score analysis. "And as banks get more accustomed to these tools and gain more skills, the uses will diffuse within the organization," says Donald Light, a senior analyst at Celent who also follows BRE vendors.
Bruno Trimouille, industry marketing manager for financial services at Mountain View, CA-based ILOG, says many institutions turn to BRMS to update and integrate existing rules across mainframes, databases, and spreadsheets or to automate existing manual processes, like loan processing. In either situation, Trimouille says older BREs are simply rules repositories that don't handle exceptions or cross-silo implementation well. "The management piece is as important as the execution," he says.
Compliance and regulatory issues are a top driver for many institutions, but having real-time adaptability to a changing business climate appears to be the top-of-mind proposition, says Traci Showalter, consulting director for global credit solutions practice at business process and IT outsourcing firm, CGI-AMS. CGI-AMS, headquartered in Canada, markets the Strata Enterprise BRE suite introduced more than a dozen years ago, and is used by six of the nation's top 10 banks, including Bank of America.
Originally designed as a batch-decisions engine for collections activities, Strata was ramped up over the years to include rules for loan originations, credit card approvals, marketing, overdraft decisions and implementation of third-party score modeling applications. Old business-rules engines hard-coded in legacy applications and platforms had to be altered within each individual department or placed in "wrappers" systems so they would run enterprise-wide and independent of the original platform, Showalter says. Any other build is a non-starter, because "the first thing we're finding when we walk in the door, they want to put the rules back in the hands of the business user," says Showalter.
She says Strata clients have seen substantial jumps in loan approvals (15 percent), delinquent collections (10 percent) and retention efforts attributed to BRMS activity. She notes one company that purportedly kept half its requested credit card closures active through rules that kicked in stepped up retention efforts.
Huntington Bancshares in Columbus, OH, used Strata's engine to integrate its front-end decisioning technology with collections to meets its compliance requirements in the auto loan- booking process, creating 20 percent more volume at 30 percent less cost by reducing human intervention. Back-office savings can also be substantial with improved rules management. Jim Sinur, vp analyst at Gartner, noted in an April Web seminar that a survey of firms using agile rules management eliminated five percent to 40 percent of its IT labor costs by removing that department from the rules-change equation.
While many banks use BRMS solely for Sarbanes-Oxley or other regulatory compliance, many institutions would still find a quick return on its investment on other issue, according to Light. "With the business-rules engine, your uncollectibles should be going down" and receivable improving with more precise lending decisions, Light says. "Those are pretty easy metrics to track."
Other vendors in the field include Pegasystems and Fair Isaac, which updated its Blaze Advisor rules engine solution a year ago with a modeling enhancement.
