Branching OutBy Mel Duvall | Posted 2006-10-02 Email Print
Service-oriented architecture has helped financial firms such as TD Banknorth neutralize integration headaches and make their legacy applications more responsive to customer needs.
The same can't be said for many other technology bets being placed when Baseline was launched five years ago.
Much of the thinking at the time was based on the premise that banking, retail banking in particular, was about to go through a significant consolidation phase. Banks would be merging—which, to a large extent, they have—and some banks would shutter branches to save costs. Banks would instead make increasing use of new technologies such as more advanced automated teller machines, telephone banking systems and Internet banking applications to steer customers away from expensive branches and their employees.
Meanwhile, competitive forces prompted banks to change strategies. Instead of closing branches, the nation's big banks went on a building spree. In the year 2000, there were about 60,000 bank branches nationwide, according to the Federal Deposit Insurance Corp. Today, there are about 86,000 branches, a 43% increase.
What went wrong with the scenario? "Banks underestimated the importance of the branch," says Mark Greene, general manager of IBM's global banking unit.
The bank as it existed a decade ago has changed. It is no longer a place where customers primarily cash checks, pay bills and update balance books. Instead, customers are much more likely to walk in seeking advice on how to invest, establish lines of credit, buy home, life and auto insurance, or sign up for a credit card with loyalty rewards.
"What's interesting is all of these other channels—ATMs, online banking, telephone banking—did not replace the branch. They supplemented the branch," says Jim Adamczyk, a senior executive with consulting firm Accenture.
Increasingly, technology such as service-oriented architecture makes it possible for a single employee—a teller or banking associate—to access and sell the wider range of products. SOA, for example, can be used to reach into legacy applications that store customer bank accounts, mortgage information or credit card data and present the information in a single window.
TD Banknorth embarked on an SOA program out of necessity. In early 2003, Petrey received word from a key technology supplier, Fidelity Investment Services, that Fidelity would no longer provide support for a middleware platform it had assumed in its purchase of Alltel Information Services. The middleware had been used by Banknorth as a key integration technology between a new Internet banking application and its back-end systems. "It forced us to reevaluate our options; it was an integral piece of our infrastructure," Petrey says.
At the same time, Banknorth was pursuing an aggressive acquisition program, one that continues to this day. Since 1987, it has completed close to 26 bank acquisitions, and grown from about 285 branches in 2000 to approximately 600 branches today. In March 2005, TD Financial Group of Toronto acquired a 51% controlling interest in the company.
As a result, according to Petrey, Banknorth had big integration challenges while it was trying to introduce new services.
The company retained a Boston consulting firm, Riverton, to help investigate its architecture. Banknorth decided that SOA had evolved so it could produce benefits beyond traditional point-to-point middleware integration methods. Chief among the benefits: the power to reuse services, such as the ability to look up customer accounts, in new applications, as well as monitor business processes.
After a proof-of-concept pilot with several vendors, Banknorth selected webMethods' SOA platform in mid-2004. "We decided to take a think-big, start-small approach," Petrey says. In other words, Banknorth visualized where it wanted to go with SOA over the long term, but started with a small project. The case called for a Web service to expedite a customer address change. The service would allow a call center agent or branch employee to initiate an address change, and automatically have that change flow through to a customer's various accounts or products with the bank.
Next up: A small-business loan origination service and an internal application to handle project requests. Then, Banknorth bit into its first mission-critical application in the fall of 2005—its online banking system.
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