03 September 2014

FinTech Forum DACH

Samarth Shekhar - FinTech Forum DACH

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European banks' race to shared services, open source

14 September 2012  |  4821 views  |  1

Further to my previous post calling for more SWIFT-style sharing of IT and back office among European Banks we now have (1) Deutsche Bank calling upon rivals to share investment banking technology; (2) ING promoting an API developer portal for building open source Retail Banking software; and (3) the ECB moving closer to a European banking union.

Even if we ignore the last one as a pipe dream, the first two are concrete steps in the right direction – perhaps too little and hopefully not too late!

Given all the talk about IT as a differentiator for banks, and all the money spent on it in the good years, it is hard for banking IT leaders to admit that much of their software is the same as the competitor next door. One would think this is even more the case at investment banks, the ultimate power-users of IT.

However, this call for “co-opetition” to share markets and trading software comes straight from the heart of Deutsche’s capital markets division, admitting that it is only the “special sauce” in some proprietary code that helps banks differentiate in the market, and almost everything else could be shared- helping big banks save “billions of Euros” that would otherwise go towards building individual systems.

Given EU banks’ compliance-related costs estimates of EUR 50 Billion in the next three years- a large part of which will be associated with IT- we are talking serious savings by sharing software and systems.

Interestingly, ING sees the API portal as a step towards innovation, helping bring “fresh ideas from outside the bank for new retail banking applications”. The pilot starts in France – suddenly the hotbed of such initiatives, given AXA Banque and Credit Agricole have already released their own open APIs – and will be rolled out worldwide if successful.

If this is the way to savings and to innovation, and four of the leading European banks are raring to go the “open” and “shared services” way, why are we waiting for Brussels?

Bon voyage!

TagsRetail bankingWholesale banking

Comments: (1)

Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune | 18 September, 2012, 14:10

Credit Unions (USA) and Volksbanks (Germany) are at least two categories of small banks I know of who share software across their respective communities. The latest move by DB and ING might suggest that, when the wallet starts pinching, big banks have to begin thinking of how to chart their course using the lighthouse established by small banks. But, sadly, this might only work in "external" areas like sanctions screening. In "internal" areas, using a common set of software across multiple banks is a pipedream - I know of large banks who don't share the same core banking or payment processing software even within their own subsidiaries in different countries!

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Samarth Shekhar

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FinTech Forum DACH

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