The past couple of years have proven to be a testing time for retail banks. Not only is customer trust and loyalty at an all time low, but the ecosystem itself is changing.  Traditional banking practices are being questioned, with the regulators leading the charge.

New regulatory demands, while necessary for the rebuild of the banking industry, put pressure on our banks – many of which are already working to full capacity. As outdated legacy systems strain under the force of ever-more stringent requirements, it is unsurprising that banks are now facing soaring IT costs just to keep above water.

It is for these reasons that an increasing number of banks are adopting more forward-thinking policies around their technology and componentised, modular solutions are gaining traction.

Imagine if, on receiving news of regulatory updates requiring a system change, rather than investing in new software or heavily re-architecting what’s in place… and then taking on the huge financial burden of integrating this (the cost of which is often triple the original software cost), banks could ‘plug and play’ a modular solution, which fits neatly into the existing system, and is written in the same semantic language. Having this ‘app store’ of interoperable modules would empower banks to reengineer systems with minimal integration and IT expertise.

There is a growing understanding, from both banks and banking software vendors, that open standards, such as service oriented architecture, are the way to achieve this app store-like vision.  If banking software was built according to standardised rules, within a SOA framework, these individual processes could easily be integrated and reconciled with the existing system. Not only is a bank very quickly brought in line with regulatory changes, but SOA allows this to occur at a fraction of the usual costs.