The Next Generation Banking Solution - SOA Based

International Group Institute for Information Industry (III)
2007/11/01

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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

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Milestones of III Banking Business Development
 Formed “Banking Automation Project Team” on 1st March 1979  Jointed developed the Core Banking System with the First Commercial 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 based) in 2004

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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

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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 Tianjian 、 Wuhan 、 Guangzhou 、 Chengdu 、

 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
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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

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e-Banking Service Requirement
Call Center

24H

24H Automatio n Counter On-Line

Holiday Counter

Center cut

24X3 65 Non -sto p Serv ice
Center Balance Control
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Counter Delay Service

Multi Batch
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e-Banking Service Requirement - Multi-Channel
POS ATM CDM KIOSK

Internet Banking (Virtual) ATM

Service workstation Branch Teller Direct sale workstation Executive workstation Call center

Multi-Channel Service

Mobile Phone Voice Phone

IC Card Check Passbook Credit/Debit Card
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FISC JCIC NCCC VISA/MASTER
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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)
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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

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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

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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: Agility: Incurring higher system maintenance and operating costs 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
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Framework for Core Banking System Renewing
Assessment
Identify Business Goal Business Process Review Target Organization Assessment As-is Applications Assessment Buy or Made Decision Prioritize the Requirements Multiple Years Construction Plan

Construction
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 Investment Evaluation

Key Performance Indicator

Service Level Management

Experienced Consultant Project Management

Technical Transfer

Processes and Tools Strategic Planning

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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

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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

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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

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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

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

III Advanced Open Banking System
CBS (Core Banking System)

(Front End Processor)

FEP

TPE Platform (Transaction Process Environment)

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System Overview
Services Delivery Channels CBS Other Systems TPE Unix
POS Browser Kiosk

FEP
Telephone Mobile Phone ATM

Enterprise Application Integration
Firewall Branch WEB Branch System Branches

External Connectivity

International Organizations

Pin Pad/MSR

Pin Pad/MSR Domestic Organizations

Passbook Printer

Teller Workstation

Passbook Printer

Teller Workstation
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Solution Features(1)

 H/W﹑S/W Independent - OPEN  Ensure the system portability  Best IT cost/benefit strategy
 Multi layer Parameter Driven  Application modularize design  New products definition flexible  Multiple transaction  Multiple DB access API
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Solution Features(2)

Customer Information Management integration Multi-currency and overdraft limit account management Full function customer service
24X365 non-stop service Multi-Channel Service

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Solution Features(3)

Centric integrated accounting system
Support 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
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e-Banking System Component -TPE

TPE Platform Transaction Process Environment

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TPE Developing Roadmap
TPE III Java Release Component based Architecture TPE III αTest Client-Server Distributed Architecture TPE II/XENIX TPE II/UNIX

Centralized Architecture
TPE/UNIX UCP/UNIX UCP/CICS TPE/OS400 TPE/CICS

TPE II/ZOS

1980

1993

1996
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2004

2005

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Structure of the TPE

Cobol Application System

C Application System

TPE
DBMS Data Communication

Operating System Hardware

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TPE II Features(1) TPE II Distributed Processing
TPE multi-domain architecture Domain 1
AP SQL TPE API TPE TM XA+ CRM DB Lib SQL

Domain 2
AP TPE API TPE TM XA+ CRM

FCS DB Lib XA

FCS XA

DBMS

DBMS

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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
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Transaction Flow
TXN Request
Branch System

TXN Output

TPE TXN mgn & monitor
input processing 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
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output processing

• Input data check • Format convert • Validation check

•Output data edit •Format convert

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e-Banking System Component -CBS

CBS Core Banking System

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CBS Characteristic
       Parameterize Structuralize and Modularize G/L system cover all application and currency Centralize Customer Information Management 24X365 non-stop servicing Security control module Standing order and Center cut servicing

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TPE/CBS Framework
CBS
Customer Mgt. Credit Line Def.
Multi-Currency Acct. Funds Transfer

Common Module

Other Transactions

Credit Mgt.

Remittance

Interest Module

Transaction Management

Deposits

Parameter Module

Loans

F/X

DB Module

Network Module

Monitor Administration

TPE
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CBS- Common Module
Operation Management
Branch Operation Management Branch On-line Log ON/OFF Workstation Log ON/OFF Off-line/Re-send/Outer-Register Management Training Mode Management Teller Cash Control File Up/Down Load

Common Process Module
Common Data Inquiry Accounting Type Balance Interbranch, Receipts/Payments Balance Teller Accounting Balance

Customer Information File Management
Customer & Guarantor Basic Data Management Customer & Guarantor Basic Data Inquiry
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CBS- Saving Deposit
Saving Deposit-Corporate
Saving Deposit (Regular) Pre-Paid Account Omnibus Accounts Deposits(A)

 Saving Deposit-Personal
Saving Deposit (Regular) Employee Accounts Government Employee Accounts Special Accounts Omnibus Accounts Deposits(B)

 Employee Deposit
Employee Accounts Retired Employee Accounts

 Financial Institution Deposit
Local Banks Deposits Foreign Banks Deposits

 Foreign Currency Saving Accounts
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CBS- Checking Deposit
Regular Checking Account
Regular Check Deposit Checking Deposit (with overdraft line) Interest-bearing Check Deposit Account

Fix-Amount Checking Deposit Accounts

Checking 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 Deposit
Local Bank Account Local Bank Overdraft Account Local Bank Auto Transfer Account Local Bank Interest-bearing Auto Transfer Account Foreign Banks Accounts Foreign Banks Overdraft Account

Bank Check Accounts Insured-Payment Check (Certified Checks)
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CBS- Time Deposit
 Time Deposit
General Time Deposit Transferable Time Deposit Certificate

Time Saving Deposit
Special Time Savings Deposit Lump-Sum Principal with multiple Interest/Payments Savings Deposit Multiple Principal deposits with Lump-Sum Payment Savings Deposit Fixed Amount Deposits with Lump-Sum Payment Savings Deposit Fixed Amount Deposits With Multiple Payments Savings Deposit

 Foreign Exchange Time Deposit  Foreign Currency Time Deposit

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CBS- Loan
General Loan (Loan-term/Secured, Unsecured)
Consumer Loans Home Mortgage Loans Others

Export Loans Foreign Currency Loans Loans Secured With Time Deposit Certificates Guarantor Operations Overdraft Loans Foreign Bills Cleaning Collection/Uncollectible Accounts Processing

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CBS- Remittance
Interbranch Remittance
Telegraphic Transfer (Credit to account) Non-credit to account Bills of exchange

 Interbank Remittance
Regular Credit to account Interbank Remittance Rejected Remittance Central Bank Remittance General Information/Message

 International Remittance
Import/Export Loans Foreign Check Emigration/Study Abroad Remittance Foreign Laborer Remittance

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CBS- FX (International Business)
Import
Import L/C operation Import Bills Processing Import Bill (For collection) Other Service operation

Foreign Exchange
Outward Remittance Outward Remittance Travelers’ Checks Inward Remittance Foreign Currency Change Clean Bills for Collection Clean Bills Purchases Inward Remittance Withhold/Stop payment cash Mgt

Export
Export L/C operation Export Bills processing Export Bill (For collection) Export Document Bills Other Service/Information

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CBS- Accounting
Multiple-Accounts Auto-created online accounts Auto-created interbank operation accounts Funds Control Operation Deposits(same branch)/(other branches-same bank) processing Interest accrual Financial Reports, Analysis reports Media Application Processing Back-up/Inquiry Operation

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e-Banking System Component -FEP

FEP Front End Processor

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FEP - System Architecture
HOST-CBS
Switching Center (FISC)
VISA/MASTER Certification Center

FEP
Terminal Ctl.
Security Mgt.

Security Module

TX Routing

System Mgt.

COMM Mgt.

TX Mgt.

Authorize Units HOST

Gateway

Gateway

Gateway

Teller W/S Self-service Branch

ATM

Self-service Terminal

POS

Browser

Telephone

Mobile Phone

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FEP - Feature & Advantage
24H non-stop operation Front 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…  On-Line Mode, Copy Mode, Off-Line Mode, Re-entry Mode

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

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FEP - Feature & Advantage
Security 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 Loading Dual Host + Disk Array
 Backup Host also support testing and application develop  Dual HOST backup via Disk Array  Highly Security and Reliability

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FEP - Feature & Advantage
RDBMS file System
 Oracle, Informix, Sybase, …  Variety Inquiry/Reporting

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

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FEP - Feature & Advantage
Modularize/Layer structure design
 Simple structure,easy maintenance  Each layer/application fully independent  Horizontal upgrade

Multiple Instances
 Multiple transaction process  Increase system performance

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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

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What is SOA?
… 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

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Vision of SOA
 Business & IT Alignment / Agility
Business Business Analyst • Social environment − Organization − Employees • Constantly changing external influence • Need to change process daily/weekly • Highly dynamic environment • Measure Profitability Business End User LOB Process Owner Process Architect Business Engineer Developer Process Administrator • Systematic structure − Hardware − Software • Desire to minimize frequency of change • Able to implement process change in months • Stable & tested system • Measure : Service level IT

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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
Traditional Business*

Today’s World-Class Business*
*Sources: CBDi

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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

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SOA Reference Architecture
Consumers Business Process

Channel

B2B
QoS Layer (Security, Management & Monitoring Infrastructure Services) Integration (Enterprise Service Bus) Data Architecture (meta-data) & Business Intelligence

Service Consumer Service Provider

Composition; choreography; business state machines

Governance

Services

atomic and composite

Service Components

Operational Systems

Packaged Application

Custom Application

OO Application

Atomic Service

Composite Service

Registry

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Framework of the SOA based Core Banking System
Software Engineering Tools
Global Best Practice

Core banking Applications Core banking Application Platform
Business Innovation & Optimization Services Development Services Interaction Services Process Services Information Services IT Service Management

SOA Architecture

ESB
Partner Services Business APP Services Infrastructure Services Access Services

H/W, Infrastructure

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SOA_Based Core Banking Realization of III
Integration & Tx Service Security, Management & Monitoring Service Data Access Service business processes
(process choreography)

Saving

Open Account

Withdraw

Deposit

services
atomic and composite

Account Balance

Interest Rate

CIF  Magnt

Interest Cal.

Authorize Magnt

Credit Limit Management

Session Management Component

service components Saving AP Module operational systems

Common Module

Transaction Mgmt. Component

Log Component Data Access IInterface Audit Component

Event Notification Component

Persistence Service Permissions Component

Queue Mgmt. Component

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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

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Thank You

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