BIAN Bids to Sidestep Legacy Infrastructure With ‘Coreless Banking’

Hans Tesselaar, executive director of BIAN, told PYMNTS that the digital transformation of banking hinges on innovation, on interoperability between financial institution and providers forged across an agile ecosystem.

But “the industry today is still very siloed,” he said, adding that there are “silos between the banks and silos inside the banks.”

While it’s true that many financial institutions (FIs) already have embraced the cloud and partner with software-as-a-service providers, they still operate with “core,” legacy systems that have been built up over decades. Those systems are monolithic and unwieldy. They’re complex, often have duplicative functions and processes, and are anything but flexible across centralized software environments. Not much is standardized. Even amid the great digital shift in financial services, mainframes are still a mainstay tied to everything from account logins and data requests. As a result: The infrastructure is less than ideal to help bring new services to end users.

“If you have standardized definitions of functionality and standardized definitions of interfaces,” he noted, “then you can help banks move into new, agile and componentized environments.”

To that end, BIAN (or the Banking Industry Architecture Network), which operates as a nonprofit standards association comprised of financial services firms, vendors and system integrators, among others, this month announced the third iteration of its Coreless Banking initiative.  

Coreless banking, said Tesselaar, is underpinned by an application programming interface (API) service architecture that helps standardize the ways in which FIs interact with one another in dynamic fashion, and how they source data and update processes in plug-and-play fashion, while shifting away from the lack of interoperability that marks static legacy systems. 

BIAN said in its announcement that the third iteration was developed in collaboration with HSBC, TCS, IBM, Zafin, Salesforce, JPMorgan Chase and others.  

As Tesselaar told PYMNTS: “we’re envisioning the moment in time — it won’t be tomorrow — when it will be feasible to run a bank without a core system.” The coreless architecture, he said, by integrating far flung applications, allows banks to “shrink the core” and access individual solutions geared towards payments, know your customer (KYC), risk and other back-end flows. 

Customer Consent Leads to Personalization

BIAN’s new iteration enables banks to obtain customers’ consent to retrieve their data — which in turn can be used to personalize and tailor a range of financial services and products. 

A customer who gives consent for their details to be given over from a “serving” bank to a financial services provider thus facilitates a sharing of products and data (via API and BIAN’s services) to, ultimately identify the “best” offerings for that individual. 

There’s of course growing recognition of the need to innovate, to tailor the interactions between FIs and customers.  As PYMNTS research has detailed in recent months, 8 in 10 bank executives have reported that they’ve boosted technology budgets and have been eyeing upgrading payments capabilities; on the consumer side of the equation, 9 in 10 individuals want personalized financial advice from their banks.  

In the background, Tesselaar said, given the global nature of BIAN, for the banks, “What we bring to the table is that you only need to ‘do’ a function once — and so we simplify the bank and make it more future-proof.”

Looking ahead, he said, the eventual evolution will be one where banks have a core that is “extremely limited.” Those core systems will exist as records systems that are connected by standardized microservices and APIs that in turn let FIs pivot between payment systems or loan systems as situations and markets demand.  

Coreless banking, he said, “will lower the operational cost for the bank and foster agility in their IT systems. You won’t need the core anymore, because everything is connected based on the function it needs to perform.”