What’s Really Impacting Financial Institutions?
The top 4 strategies that are being adopted by FIs to address their IT challenges are:
Application Rationalization – Due to changing business strategies and decisions, such as mergers and acquisitions, FIs end up creating and maintaining multiple applications doing the same logical group of work. Application rationalization is resulting in consolidation of such applications to agile, scalable and resilient platforms.
Data Center Modernization – Changing economic trends, business priorities and technology revolution such as virtualization, automation and cloud computing are forcing FIs to rethink the way their data center is being maintained. More and more institutions are opting for agile and cost-effective data center upgrades, resulting in a more streamlined business and operating model.
Legacy Modernization – The need to remain competitive in the market, in terms of cost, quality and value-added services, is resulting in FIs investing in new technologies to replace outdated architecture with state-of-the-art, user-friendly, cost-efficient and scalable platforms.
Application Updates – Due to the changing regulatory landscape, messaging standards and business and operating model updates, there is a need to renew key business applications.
This is resulting in an overhaul of business and infrastructure processes, leading to integration challenges and messaging upgrades. More often than not, these processes follow disparate messaging formats, which inherently pose significant challenges for a coherent and seamless environment
Messaging and Integration Challenges
Some of the common messaging and integration challenges that FIs encounter in day-to-day business operations are:
There could be multiple formats and protocols to support internal systems. For new initiatives, new components have to work along with legacy infrastructure.
- Huge investments are required to make changes to industry standard protocols (SWIFT/FIX/FpML), including forced changes to downstream systems with low impact on processing requirements.
- Inability to manage complex message routing requirements.
- Regulatory requirements such as Dodd Frank Act, European Market Infrastructure Regulation (EMIR) and Sarbanes-Oxley Act that are resulting in continuous changes to the messaging structures and causing a ripple effect on applications complying with these standards.
- All these challenges are making FIs take up:
- Monitoring, maintenance and upgrade initiatives for newer messaging standards such as SWIFT, ISO, PAIN and FIX.
- Big investments for accommodating application formats, protocols, handshakes and standards.
- Complex client onboarding and setup initiatives, resulting in revenue realization delays.
- Long testing cycles for message transformation and integration validation.
FIs can explore multiple options (as depicted in Figure 1) to arrive at a solution that best addresses the requirements of their messaging framework.