SAP defines banking systems strategy
ISSUE 15.9, June 06
Trevor Skeels,
SAP
SAP’s strategy of applying a Service Oriented Architecture (SOA) to its banking applications is taking shape, with the supplier working with nine banks to define generic services. With the strategy it has now become clear that SAP intends to gradually phase out its lower-end retail deposits system, BCA, in favour of the higher-end AM. As a result, BCA is not part of the SOA plans.
The nine banks working with SAP on the first phase of the project are ABN Amro, ABSA, Barclays, BBVA, Credit Suisse, Deutsche Postbank, ING, Nordea and Standard Bank. They have defined 70 or so enterprise services. SAP intends to map these back to its banking applications, primarily AM and its lending system, CML, as well as ongoing development projects. Phase two, from September, is intended to involve 40 banks and partners, as well as seeing a broadening of scope, deeper definitions, and a move towards open standards. Trevor Skeels, who heads the marketing of SAP’s Enterprise Services Architecture (ESA) initiative (basically, its SOA strategy – see IBS, June 2005), admits there is a danger that these will look like SAP standards but says this is not the intention, with third parties able to use them. Around one-third of the services to date are outside the scope of SAP’s applications, he adds. They span corporate and retail banking and include services in the areas of credit cards and payments. Within an SAP environment, an Enterprise Services Repository will reside above Netweaver.
For payments, Skeels points out that the increasing commoditisation means this is a good area to apply an SOA approach. SAP and Accenture are working on a payment system development at Postbank; the kernel from this project is intended as a commercial offering, with work being done at present to include support for SEPA. Postbank is insourcing payments processing from Deutsche Bank and Dresdner Bank (IBS, November 2003), with other German banks seemingly looking at this route as well. The provision of payment processing could be made easier if based on a set of generic services. At present, Postbank has taken over the payments infrastructure of its two outsource customers; the intention is to migrate the processing of these and Postbank itself to the new platform.
In terms of the banking applications, SAP has sometimes sought to give the impression that these constitute a generic platform but, in reality, the offering is made up of different applications with different roots. At least one customer, Kaupthing Bank, was taken by surprise at the amount of systems integration effort needed to link the SAP offerings (IBS, June 2005). The SOA route is intended to bring tighter integration: Skeels likens the future architecture to ‘Lego bricks’.
When it comes to BCA, this is the system initially developed with four German banks. It is now used by around 30 institutions, mostly in Germany but with a reasonable number of sites elsewhere (Kaupthing Bank is one user, for instance). Since the emergence of AM, largely out of a parallel development project at Postbank, BCA has been positioned by SAP for banks with below 500,000 accounts. BCA will continue to be supported, says SAP’s director of banking solutions, Jesper Behr, and it could be ten years before users of BCA are ready to move. Moreover, BCA is still considerably broader in functionality than AM so there will still be reasons for banks to buy the former. However, there will be a migration path, with the intention of making it as easy as possible to move. To date, generic enhancements have been made to both AM and BCA; going forward, this will no longer be the case.
While the development and implementation of AM at Postbank has taken considerably longer than intended, the bank seems to be reaping some of the benefits. Migration of its 17 million savings accounts was completed in October last year, following on from the migration of customer master data and current accounts in 2003 and lending accounts in 2004. Using the product configuration component of the system, the bank has launched a World Cup Savings Account, with variable interest rates, in part based on the progress of the German national team. The rate increases with each win, ending at 7.75 per cent if Germany wins the final. The offer ends on 9th June and is limited to 10,000 customers.
