New regulations and heightened customer demands are putting pressure on banks to upgrade their IT systems. Jan-Dirk Becker of Deutsche Bank (far right) and Dietmar Schwarzenbacher of UNiQUARE (right) talk to Future Banking about how service-oriented software architecture can provide the flexibility needed to deal with a rapidly changing environment.
In the fallout from the financial crisis, many banking divisions are looking to address the issue of transparency. Although this is partly due to the obligations posed by Basel II and III, most have realised that having a clear picture of risk exposure and collateral not only allows for more informed decision-making, but inspires confidence among customers.
As new regulations begin to come into force, banks will also have to make sure that their systems are flexible enough to respond quickly and with minimal risk. With these challenges in mind, Deutsche Bank has been undertaking a series of upgrade projects, one of which is based around its loans platform.
The new system - known as the object database (ODB) - is a property database designed to unite the loans businesses of Deutsche Bank and all of its legal entities. It will eventually feature in-depth information on all assets held by the bank, from gold to cars and ships, giving the bank a clear, up-to-date picture of its risk exposure.
"This is mainly a risk-management tool," says Deutsche Bank's Jan-Dirk Becker, ODB project manager. "We are collecting information on properties that we lay our collaterals on. We want to build an environment in which we can benefit from Basel II, where the value of each property is evaluated and given a unique value across all of our business arms."
The numerous divisions and subsidiaries that make up Deutsche Bank influenced systems design in other ways. The bank has undertaken a series of transformational mergers, acquiring Norisbank, Berliner Bank and Postbank in the past few years. Consequently, its loans business is split into multiple units, all of which operate along a range of sales channels and have different approaches to placing products in the market.
"For example, we are dealing with a more advisory approach at our Deutsche Bank branches, but a more consumer banking approach at Postbank," Becker explains. "We wanted to build a new system that would allow different kinds of business to run on a single IT platform, allowing us to take the same approach for any back-office task."
The loans business as a whole has its property information divided between two existing systems. The intention was for the legacy platforms to remain, but overlap and feed in to a new solution. This is no easy task.
"We built the new database in between two existing systems, which we want, as much as possible, to remain untouched," Becker says. "We currently have two databases; we wanted to keep both running, but collect all the information from them so that it is available in one place. This makes it very difficult to install new software. We had to carefully tailor our application, but also introduce a degree of cross-bank standardisation."
A modular solution
To help fulfil these software requirements, Deutsche Bank brought in specialist UNiQUARE. Based in Austria, UNiQUARE is a leading supplier of innovative front-end solutions for the financial services industry. By adopting the company's modular approach to software architecture, Deutsche Bank was able to combine a standardised system with customised, department-specific features.
"Deutsche Bank had a very precise idea of what it wanted," says Dietmar Schwarzenbacher, CEO of UNiQUARE. "We tried for the most part to use different service components, so that pieces can be added and removed without having to change the entire platform. Service-orientated architecture allows this - the combination of existing software with new component services that are connected via process management in a very efficient new model. You can use ten services that are the same, but still have a special component for, say, mortgages or consumer finance."
At the front end, a premium was placed on usability. With multiple business users migrating from different systems, the new system had to be operable without the need for extensive technical knowledge. UNiQUARE's approach allows for the flexible allocation of user roles and gives employees the ability to easily alter loans, conditions and parameters.
"Our company has always paid great attention to front ends, so we have no problem dealing with different types of back-end core banking systems," Schwarzenbacher explains. "Our solutions are always geared towards having straight-through processing and are based on an easy-touse philosophy for business employees. It was important that no technical education was necessary to handle the new platform."
With launch planned for the middle of June, UNiQUARE and Deutsche Bank are in the process of applying the finishing touches. Despite the challenges posed by finding a solution suitable for all loan division employees, the project is on schedule. According to Becker, one of the keys to success was having a partner that took the time to learn about the specifics of Deutsche Bank's loan business.
"Property is theoretically a very complicated area of banking," he explains. "We have to deal with a lot of legal documentation and need to have a deep knowledge of what it means. For this reason, it's important to have partners that are willing to understand our business as well in order to come up with the best solution. It's not often that IT projects go as smoothly as this one. We have had some problems, but have always been able to find solutions."
According to Schwarzenbacher, Deutsche Bank is a forerunner in the adoption of a modular approach to systems architecture. Initial costs for such a method are generally higher, but over the long-run the benefits are clear.
"Deutsche Bank is one of the first clients that really is realising the benefits of a platform based on service-oriented architecture," he says. "In the beginning it is more expensive than typical software models, but later on it creates far greater flexibility and gives a bank much more time to react to market changes."
Over the next few years, this could prove extremely important. Regulatory change will continue apace and rising consumer demands will lead to the creation of new products and services through increased numbers of channels. System flexibility will be necessary to maintain a competitive advantage.
"The loan market will face all of these new regulations, which will undoubtedly change the requirements of the market," Schwarzenbacher says. "Moving your product development strategy in a service-orientated direction is, in our view, the most efficient and cost-effective approach. Exceptional process transparency assists easy optimisation and gives you a high level of controllability."
From Deutsche Bank's perspective, the property database is part of a much larger development programme known as Retail Target Platform, which will see the extensive redevelopment of the retail division's software environment. Becker sees the component-based approach playing a role in this and future IT programmes.
"There are a lot of projects going on across the bank and many of these are component-based," Becker says. "We are also looking at different SAP models for both our back and front office. There are a lot of discussions going on, with service-oriented architecture sure to play a role."
