SOA Banking 11012007

1 INSTITUTE FOR INFORMATION INDUSTRY

The Next Generation Banking Solution - SOA Based

International GroupInstitute for Information Industry (III)

2007/11/01


Contents

Milestones of III Banking Business Development e-Banking Requirements and Challenges Trend for the Core Banking System Renewing

III Advanced Open Banking System III SOA based Core Banking System


Milestones of III Banking Business Development

Formed “Banking Automation Project Team” on 1st March 1979 Jointed developed the Core Banking System with the First Com

mercial Bank and launched in Dec. 1981 Developed the Core Banking System in Unix platform in 1989 Jointed developed the 2nd generation Core Banking System with

IBM Taiwan in 1994 Penetrated into China Core Banking System market with IBM 、

Bull and Tadem in 1994 Developed the 3rd generation Core Banking System (Java base

d) in 2004


References in Taiwan

First Commercial Bank Chiao Tung Bank Shin Kong Bank Macoto Bank Land Bank Chunghwa Post Co. Kaohsiung Bank Union Commercial Bank Farmer’s Bank


References in China Post Saving Burau(42 Provinces and cities)

– Dalian 、 Hainan 、 Hefei 、 Nanchang 、 Xining 、 Guiyang 、 Lanzhou 、 Taiyuan Xiamen 、 Fuzhou 、 Quanzhou 、 Chengdu 、 Harbin 、 Xiangfan 、 Huangshi

– Liupanshuishi 、 Hengyang 、 Zunyi 、 Wuhu 、 Sichuan 、 Fujian support center– Shenyang 、 Luoyang 、 Xinxiang 、 Datong 、 Linfen 、 Sanming 、 Nanping– Changzhi 、 Chongqing 、 Kunming 、 Huhehaote 、 Handan 、 Lasa

Back of China － TPE site license contract Agriculture Bank of China

– Shanghai Pudong 、 Shangjai Pusi 、 Beijing 、 Jiangsu 、 Jinan Bank of Communications

– Hangzhou 、 Shantou 、 Zhongshan 、 Wuhan 、 Guangzhou 、 Chengdu 、 Tianjian

Industrial Commercial Bank of China － Tianjian branch City Commercial Bank

– Shanghai 、 Nanjing 、 Qingdao 、 Jinshan 、 Nantong 、– Leshan 、 Luzhou 、 Deyang 、 Panzhihua

China Minsheng Commercial Bank － Shanghai branch


Contents




Multi Multi BatchBatch

24H24HCall CenterCall Center

Counter Counter Delay Delay ServiceService

CounterCounter On-LineOn-Line

24H24HAutomatioAutomatio

nn

CenterCenterBalance Balance ControlControl

Holiday Holiday CounterCounter

Center Center cutcut

24X36524X365Non-stop Non-stop ServiceService

e-Banking Service Requirement


Internet BankingInternet Banking(Virtual) ATM(Virtual) ATM

Mobile Phone Mobile Phone Voice PhoneVoice Phone

POSATMCDMKIOSK

Multi-Channel Service

IC CardIC CardCheckCheck

PassbookPassbookCredit/Debit CardCredit/Debit Card

FISCJCIC

NCCCVISA/MASTER

Service workstationService workstationBranch TellerBranch TellerDirect sale workstation Direct sale workstation Executive workstationExecutive workstationCall centerCall center

e-Banking Service Requirement - Multi-Channel


Challenges from Market Competition(1)

New technology is booming– Open system vs. proprietary system– New delivery channels are added – Consistency of service offering across delivery channels

Increased customer expectations– Premium value added services across delivery channels are looked

upon as a necessity Increased competition

– Challenge in new customer acquisition & customer retention– Reduced time to market for new products & services– Profitability analysis across delivery channels & products– Mergers & acquisitions are becoming a norm in banking industry

(People, Processes, Technology & Data)


Challenges from Market Competition(2)

Decreased profit margins – Cutting costs will be the trend

– Low operations & recurring costs are importance

– Increase in volumes has become key to make more profits

Risk Management– Control and track the Non Performing Assets

– Alert potential NPAs in advance

– Basel II


Contents




Drivers for Core Banking System Renewing

Common Drivers

Flexibility: Need a flexible system to support launching new products in time

Quality: To handle the increasing transaction volume. If current system can not process stably, it’s obvious the system needs to be renewed.

Costs: Incurring higher system maintenance and operating costs

Agility: Requiring the ability to respond to urgent business needs

Analytics: Demanding increased sales support, customer analytics and propensity modeling capabilities

Other Drivers– Solution and Vendor Viability

– Questionable Scalability

– Diminished Operational Efficiencies

– Cross-System Incompatibility


Framework for Core Banking System RenewingAssessment Construction

Identify Business Goal

Business Process Review

Target Organization Assessment

As-is Applications Assessment

Buy or MadeDecision

Multiple Years Construction Plan

Phased Project Implementation

Infrastructure Construction

Requirement/Change Management

System Integration

Quality Assurance

Transition Management

Operation Procedure Development

Build up Technical Capability

Management

IT Governance

Applications Management

IT Portfolio Management

Technical InvestmentEvaluation

Key Performance Indicator

Service Level Management

Prioritize the Requirements

Experienced Consultant Technical Transfer

Project Management Strategic Planning

Processes and Tools


Key Success Factors (1) Business goals orientated

– Begin with the business objectives

– Know where you are, identify:• Affordable Budget

• Operational resource (technology and human skills)

• Market and competitive status, …

– Know where you wish to go to achieve business objectives• Creating a vision of the future that places the bank in its optimum position

to succeed

– Identify the business drivers and align to them with architecture and technology


Key Success Factors (2) Experienced technology partner

– Setup a long term relationship with experienced technology partner

– Partner selection should include these criteria:• Standards commitment

• Sourcing suitability

• Reference site qualifications

• Service-Oriented ability

• Willing to provide the technical transferring


Key Success Factors (3) Suitable solution

– High availability and scalability

– Meet the local functional and regulatory requirements

– Deliver effective MIS reporting

– Low initial investment and recurring investments

– Reasonable Total Cost of Ownership (TCO)

– Protects bank’s investment in the long run


Contents




Scope of the Core Banking System Core banking systems form the basis of the retail bank’s IT platform Core Banking System provides

– Deposit processing– Consumer loan and mortgage processing– Special loan for the specific purpose– Payment service– General ledger – Customer Information Management

Banks make these services available across– Branches– ATMs, kiosk– Call centers, interactive voice response (IVR)– Internet banking


III Advanced Open Banking System

CBS CBS (Core Banking System)(Core Banking System)

FEP FEP (Front End Processor)(Front End Processor)

TPE TPE PlatformPlatform (Transaction (Transaction

Process Process Environment)Environment)


System Overview

Unix

TPE

CBS FEP

TellerWorkstation

PassbookPrinter

Pin Pad/MSR

PassbookPrinter

Pin Pad/MSR

Branch

TellerWorkstation

WEB Branch System

POS

Telephone Mobile Phone

Browser

ATM

Kiosk

Services Delivery Channels

Domestic Organizations

International Organizations

External ConnectivityEnterprise Application Integration

Other Systems

Firewall

Branches


H/W S/W Independent - ﹑ OPEN

Ensure the system portability

Best IT cost/benefit strategyMulti layer Parameter Driven

Application modularize design

New products definition flexible

Multiple transaction

Multiple DB access API

Solution Features(1)


Customer Information Management integration

Multi-currency and overdraft limit account management

Full function customer service 24X365 non-stop service

Multi-Channel Service



Centric integrated accounting systemSupport Multi-Currency Accounting

Support profit center accounting

Support multiple transaction

Real time accounting balance

Fully Supervisor Control Management and Financial Statements

Commit BASELII risk model required information



TPE PlatformTPE Platform

TTransactionransaction PProcessrocess EEnvironmentnvironment

e-Banking System Component -TPE


TPE Developing Roadmap

2004

UCP/CICS

UCP/UNIXTPE/UNIX

TPE/OS400

TPE/CICS

TPE II/UNIX

TPE II/XENIX

TPE II/ZOS

TPE IIIαTest

2005 2006

TPE IIIRelease

199619931980

CentralizedArchitecture

Client-ServerDistributed Architecture

JavaComponent based

Architecture


Structure of the TPE

Hardware

DBMS Data Communication

Operating System

TPE

CobolApplication System

C Application System


TPE II Features(1) TPE II Distributed Processing

DB Lib

TPE

AP

TPE API

XA

FCS

SQL

TM CRMXA+

DBMS

DB Lib

TPE

AP

TPE API

XA

FCS

SQL

TM CRMXA+

DBMS

Domain 1 Domain 2

TPE multi-domain architecture


TPE II Features(2)

Support dual-TPE architecture for 24*365 Support multiple hardware platforms

– IBM AIX machine

– SUN Solaris machine

– HP UX machine

Support multiple DBMS– Oracle

– DB/2

Provide a friendly application development environment Protect the investment on the application systems


Transaction Flow

BranchSystem

TXN mgn & monitorTPE

invoke the AP

TPE API•RDBMS/File access•Common Data Area access•Txn output•Txn Logging•Access txn log•Request for batch online•Reverse txn processing•Request for RENDO

outputprocessing

TXN Output

•Output data edit •Format convert

TXN Request

inputprocessing

• Input data check• Format convert• Validation check


CBS CBS Core Banking SystemCore Banking System

e-Banking System Component -CBS


CBS Characteristic

ParameterizeStructuralize and ModularizeG/L system cover all application and currencyCentralize Customer Information Management24X365 non-stop servicingSecurity control moduleStanding order and Center cut servicing


InterestModule

InterestModule

DBModule

DBModule

NetworkModule

NetworkModule

ParameterModule

ParameterModule

TPE/CBS Framework

Transaction Management

Transaction Management

MonitorAdministration

MonitorAdministration

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Rem

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Rem

ittance

TPE

CBS


CBS- Common Module

Operation ManagementOperation ManagementBranch Operation ManagementBranch On-line Log ON/OFFWorkstation Log ON/OFFOff-line/Re-send/Outer-Register ManagementTraining Mode ManagementTeller Cash ControlFile Up/Down Load

Common Process ModuleCommon Process ModuleCommon Data InquiryAccounting Type BalanceInterbranch, Receipts/Payments BalanceTeller Accounting Balance

Customer Information File ManagementCustomer Information File ManagementCustomer & Guarantor Basic Data ManagementCustomer & Guarantor Basic Data Inquiry


CBS- Saving Deposit

Saving Deposit-CorporateSaving Deposit-Corporate Saving Deposit (Regular)

Pre-Paid AccountOmnibus Accounts Deposits(A)

Saving Deposit-PersonalSaving Deposit-PersonalSaving Deposit (Regular)Employee AccountsGovernment Employee AccountsSpecial AccountsOmnibus Accounts Deposits(B)

Employee Deposit Employee Deposit Employee AccountsRetired Employee Accounts

Financial Institution DepositFinancial Institution DepositLocal Banks DepositsForeign Banks Deposits

Foreign Currency Saving Accounts Foreign Currency Saving Accounts


CBS- Checking DepositRegular Checking AccountRegular Checking Account

Regular Check Deposit Checking Deposit (with overdraft line)

Interest-bearing Check Deposit Account

Fix-Amount Checking Deposit AccountsFix-Amount Checking Deposit AccountsChecking Account (with overdraft line)

Checking Account (Fixed Amount)Checking Account (Fixed Amount, With Served overdraft line)Checking Account (Fixed Amount, Served Credit/overdraft line)Employee Account (Fixed Amount, Served Account)

Bank DepositBank DepositLocal Bank AccountLocal Bank Overdraft AccountLocal Bank Auto Transfer AccountLocal Bank Interest-bearing Auto Transfer AccountForeign Banks Accounts

Foreign Banks Overdraft Account

Bank Check AccountsBank Check AccountsInsured-Payment Check (Certified Checks)Insured-Payment Check (Certified Checks)


CBS- Time Deposit

Time DepositTime Deposit General Time Deposit Transferable Time Deposit Certificate

Time Saving DepositTime Saving DepositSpecial Time Savings DepositLump-Sum Principal with multiple Interest/Payments Savings DepositMultiple Principal deposits with Lump-Sum Payment Savings Deposit

Fixed Amount Deposits with Lump-Sum Payment Savings DepositFixed Amount Deposits With Multiple Payments Savings Deposit

Foreign Exchange Time DepositForeign Exchange Time DepositForeign Currency Time DepositForeign Currency Time Deposit


General Loan (Loan-term/Secured, Unsecured)General Loan (Loan-term/Secured, Unsecured)Consumer LoansHome Mortgage LoansOthers

Export LoansExport LoansForeign Currency LoansForeign Currency LoansLoans Secured With Time Deposit CertificatesLoans Secured With Time Deposit CertificatesGuarantor OperationsGuarantor OperationsOverdraft LoansOverdraft LoansForeign Bills CleaningForeign Bills CleaningCollection/Uncollectible Accounts ProcessingCollection/Uncollectible Accounts Processing

CBS- Loan


CBS- Remittance

Interbranch RemittanceInterbranch RemittanceTelegraphic Transfer (Credit to account)Non-credit to accountBills of exchange

Interbank RemittanceInterbank RemittanceRegular Credit to accountInterbank RemittanceRejected RemittanceCentral Bank Remittance

General Information/Message

International RemittanceInternational RemittanceImport/Export LoansForeign Check

Emigration/Study Abroad RemittanceForeign Laborer Remittance


CBS- FX (International Business)

ImportImportImport L/C operationImport Bills ProcessingImport Bill (For collection)Other Service operation

ExportExport

Export L/C operationExport Bills processingExport Bill (For collection)

Export Document Bills Other Service/Information

Foreign ExchangeForeign ExchangeOutward RemittanceOutward Remittance

Travelers’ Checks Inward Remittance Foreign Currency Change

Clean Bills for Collection Clean Bills Purchases

Inward RemittanceWithhold/Stop payment

cash Mgt


CBS- Accounting

Multiple-Accounts Auto-created online accountsMultiple-Accounts Auto-created online accountsAuto-created interbank operation accountsAuto-created interbank operation accountsFunds Control OperationFunds Control OperationDeposits(same branch)/(other branches-same bank) Deposits(same branch)/(other branches-same bank) processingprocessingInterest accrual Financial Reports, Analysis reportsInterest accrual Financial Reports, Analysis reportsMedia Application ProcessingMedia Application ProcessingBack-up/Inquiry Operation Back-up/Inquiry Operation


FEPFEPFFrontront EEndnd PProcessorrocessor

e-Banking System Component -FEP


Authorize UnitsHOST

Security Module

SwitchingCenter(FISC)

HOST-CBSHOST-CBS

FEP

Teller W/S POSATM Self-serviceTerminal

Self-serviceBranch

VISA/MASTERCertification

Center

Telephone MobilePhone

Browser

Gateway Gateway Gateway

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Ctl.

FEP － System Architecture


FEP － Feature & Advantage

2424H non-stop operationH non-stop operation On-Line Mode, Copy Mode, Off-Line Mode, Re-entry Mode

Front End ProcessingFront End Processing Interbank online transaction process-Bank Card, Smart Card, ATM Withdraw, Transfer, Interbank Remittance, Credit Inquiry, Payment, International Bank Card… Agent service gateway-ATM payment, Utilities payment Call Center、 Voice System、 Internet Banking、 FX System、 Trust System…

Auto-service devices connection and real-time monitoringAuto-service devices connection and real-time monitoring ATM, CDM, POS, APM, KIOSK …



Security ControlSecurity Control H/W DES connection Comm decode/encode for connected system (FISC、 NCCC….) Auto devices comm decode/encode Bank Card、 PIN Letter Process

Share Host Processing LoadingShare Host Processing LoadingDual Host + Dual Host + Disk Array Disk Array Backup Host also support testing and application develop

Dual HOST backup via Disk Array Highly Security and Reliability


RDBMSRDBMS file System file System Oracle, Informix, Sybase, … Variety Inquiry/Reporting

Interbank Remittance SystemInterbank Remittance System Store and Forward design FEP multiple outward Remittances FISC multiple inward Remittance Multiple inward remittance server



Modularize/Layer structure designModularize/Layer structure design Simple structure,easy maintenance Each layer/application fully independent Horizontal upgrade

Multiple InstancesMultiple Instances Multiple transaction process Increase system performance



Contents




… a service?

A repeatable business task – e.g., check customer credit; open new account

… service orientation?

A way of integrating your business as linked services

… service oriented architecture (SOA)?

An IT architectural style that supports service orientation

… a composite application?

A set of related & integrated services that support a business process built on an SOA

What is SOA?


Vision of SOA Business & IT Alignment / Agility

• Social environment

− Organization

− Employees

• Constantly changing external influence

• Need to change process daily/weekly

• Highly dynamic environment

• Measure Profitability

• Systematic structure

− Hardware

− Software

• Desire to minimize frequency of change

• Able to implement process change in months

• Stable & tested system

• Measure : Service level

I TBusiness

Business Analyst

Process

Administrator

Process Architect

Business Engineer

LOB Process

Owner

Business

End User

Developer


Traditional Business*

Today’s World-Class Business*

*Sources: CBDi

Business need Flexibility and Reusability

Economics: globalization demands flexibility

– Business processes: changing quickly

– Information: greater availability

Growth: at the top of the CEO agenda

Reusable assets: can cut costs


Barriers to Business Flexibility and Reuse

Lack of business process standards

Architectural policy limited Point application buys to

support redundant LOB needs

Infrastructure built with no roadmap


Atomic Service Composite Service Registry

Servicesatomic and composite

Operational Systems

Service Components

Consumers

Business ProcessComposition; choreography; business state machines

Service P

rovid

erS

ervice Co

nsu

mer

Inte

gra

tion

(En

terp

rise S

erv

ice

Bu

s)

Qo

S L

aye

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cu

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an

age

men

t & M

on

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frastru

cture

Se

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Data

Arc

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ata) &

Bu

sin

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Intellig

en

ce

Go

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Channel B2B

PackagedApplication

CustomApplication

OOApplication

SOA Reference Architecture


Framework of the SOA based Core Banking System

H/W, Infrastructure

Infrastructure Services

PartnerServices

Business APP Services

AccessServices

InteractionServices

Process Services

InformationServices

Business Innovation & Optimization Services

ESBDev

elop

me

ntS

ervi

ces

IT S

ervi

ceM

anag

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nt

Core banking Application Platform

Core banking ApplicationsGlobal Best Practice

SOAArchitecture

Softw

are Engineering

Tools


Da

ta A

cc

es

s S

erv

ice

Inte

gra

tion

& T

x S

erv

ice

business processes(process choreography)

servicesatomic and composite

service components

operational systems

Se

cu

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ag

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en

t &M

on

itorin

g S

erv

ice

Saving

Open Account

SOA_Based Core Banking Realization of III

InterestRate

InterestCal.

AccountBalance

CIF Magnt

AuthorizeMagnt

CommonModule

Permissions Component

Event NotificationComponent

Session ManagementComponent

PersistenceService

Queue Mgmt.

Component

Data Access IInterface

Transaction Mgmt.

Component

LogComponent

AuditComponent

Credit LimitManagement

DepositWithdraw

SavingAP Module


Benefit of the SOA based Core Banking System

New core banking system which– Comply with market requirements and management environment

– Align with further growth strategies and technology trend

– Take the advantage of OPEN system for reasonable TCO

Improve the flexibility of system maintenance and quality– Quick Reaction to the market requirement

– Easy to maintain

– Capitalize the software asset with the reusability feature

– Open technology, standard & availability of resources in the industry


Thank You

SOA Banking 11012007

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