As Published In November 2005

Dynamic Banking
By David Baum

Webster Financial Creates A Customizable Payment Solution.

The banking industry depends on some of the world's most stalwart information systems to make payments, transfer funds, and manage liquidity. These workhorse systems do the job with precision and reliability on a massive scale. Unfortunately, in the modern world of real-time financial services—where e-commerce, microbilling, and self-service banking are fast becoming the norm—the batch-oriented, end-of-day processing of these legacy systems has become their undoing. Customers and merchants demand more-flexible options from their financial services providers, even as banks strive to customize their service offerings and improve their ability to transition to an intraday environment.

According to Christopher Formant, executive vice president of global financial services at BearingPoint, these outdated applications are clashing with rising expectations for personalized service, particularly as internet banking hits its stride. Because most of these payment systems were built 30 or 40 years ago, they lack the flexibility and responsiveness that customers expect in today's world of Web-aware software applications. "Few of these older systems are interactive, which means banks must treat every customer the same way—or make tedious manual changes to the rules that govern the workflow to accommodate new business models," he explains.

Of course, there are exceptions. Waterbury, Connecticut-based Webster Financial is using Oracle technology to evolve beyond static banking workflows, even as it improves transaction error rates and reduces costs. Using the industry-standard Business Process Execution Language (BPEL) in the context of a service-oriented architecture (SOA), Webster has created a payment processing solution that can be easily modified, based on customer, time of day, liquidity, or almost any other factor. As a result, Webster is more responsive to its customers and is able to dynamically modify its systems as new opportunities arise.

"The commercially available payment processing solutions were simply not meeting our expectations," says Greg Jacobi, vice president of e-commerce at Webster. "Not only were they unable to meet modern internet requirements, we were also experiencing unacceptably high error rates, which forced us to institute many manual procedures to ensure that those problems weren't passed along to our customers."

Focus on Service

As the largest bank headquartered in New England, Webster Bank processes hundreds of thousands of payments each month. An error rate of even 1 percent would be extremely costly, motivating Jacobi and his software development team to create their own payment solution for electronic bill payment. "We projected an ROI for the project by calculating what it would mean to improve the error rate," Jacobi explains. "A more accurate payment system would not only make it easier for our customers to do business with us, but the resulting cost savings would fund the development effort."

Webster used Oracle's BPEL platform to create the new payment system based on Web services—loosely coupled software objects that can communicate with each other, even over the internet (see sidebar, "Connecting the Dots," page 58). Web services are discrete units of work that execute business functions, such as exchanging data and calling other programs. When properly constructed with open standards, they can also interface with the legacy systems that most banks depend on for their fundamental business operations.

This type of flexibility is essential in the context of today's payment systems. According to Jacobi, what customers see when they go online to pay a bill is just a very small piece of the total application, which consists mostly of back-end processes for routing payments and reconciling accounts. Often, many different companies and service providers control the back-end processes. For example, the customer's home bank might provide the Web front end for entering account information and initiating payments. The workflow processes for executing transactions might be handled by a legacy application, perhaps hosted in an offline data center. And any necessary credit checks might be outsourced to a service bureau.

Visibility into Development

Snapshot Webster Financial www.websteronline.com Webster Financial is the holding company for Webster Bank, National Association, and Webster Insurance. With US$17.4 billion in assets, Webster provides business and consumer banking, mortgage, insurance, financial planning, trust, and investment services. Year founded: 1935 Headquarters: Waterbury, Connecticut Number of employees: Approximately 3,400 Market capitalization: US$2.5 billion Products and services: Oracle Database 10g, Oracle Application Server 10g, Oracle BPEL Process Manager, Oracle Business Integration, Oracle Financials, Oracle Discoverer, Oracle JDeveloper 10g, Oracle Internet Directory, Red Hat Linux

In part because of these complex, multiparty workflow requirements, the information technology team at Webster Financial used the BPEL modeling tool within Oracle JDeveloper to create its payment processing application. A core component of Oracle Business Integration, Oracle BPEL Process Manager enables developers to describe and execute process-flow logic more easily. As the cornerstone of process orchestration and execution within SOA, the BPEL standard provides an enterprise blueprint for simplifying integration projects while increasing their strategic value.

Jacobi says that using the BPEL platform makes the iterative development process more accurate for developing new applications. "As the project was progressing, we were able to demonstrate the workflow to our stakeholders within the actual modeling environment," he explains. "Other development tools require you to work in a more programmatic environment, which is inscrutable to business users. Developing and demonstrating in a single environment is more accurate and efficient all around."

Jacobi likes the Oracle product set, because it is so comprehensive. Webster used the Oracle BPEL platform, Oracle Database 10g, and Oracle Application Server 10g, along with the embedded management tools for maintaining the solution in a grid computing environment, which can be easily expanded or contracted using low-cost hardware. By pooling IT resources, such as hardware, applications, and data, into a virtual computer, Oracle Grid Computing delivers processing power on demand. "Oracle provides everything we need for developing, monitoring, and managing the solution, so we don't need to worry about integrating and supporting a bunch of disparate technologies," he explains. "For us, this was a huge benefit."

Webster installed the new payment system on a cluster of Intel-architected IBM blade servers running Oracle 10g and Red Hat Linux. Essential system components, such as the CPU and memory, reside on the individual blades, and the blade enclosure provides centralized resources, such as redundant power supplies, cooling fans, and remote-management capabilities. This type of modular architecture makes efficient use of space and resources while enabling rapid server provisioning. "Each blade has exactly the same hardware configuration, so we can move capacity where we need it," Jacobi says.

Visibility into Deployment

Webster Bank's custom online banking and automated bill payment solution proves its value by reducing error rates. It also provides superior monitoring capabilities and is easy to maintain. "The BPEL platform not only handles our business process management functions, it also efficiently performs important business activity monitoring processes," Jacobi says.

For More Information LEARN more about Oracle BPEL Process Manager READ about Oracle solutions for financial services

Whereas business process management (BPM) involves sending and receiving transactions—in this case, the actual payments—business activity monitoring (BAM) provides a window into those processes, so managers can survey what is transpiring. BAM provides views of business events, by providing real-time visibility into key performance indicators and metrics, so managers can quickly detect and correct inefficiencies.

The feedback on the new payment system has been so positive that Webster can foresee extending the capabilities to customers and partners. Because developers created the system by using SOA, they can expose certain parts of the application over the internet to other companies that are interested in using some portion of the technology. "The Oracle-based systems we have created enable a flexible business model that gives us lots of options for the future," Jacobi concludes. "Our payment processing system is simpler to maintain, more accurate, and better able to accommodate modern internet requirements."

Connecting the Dots SOA Streamlines Application Renewal Projects The need for flexible and agile information systems is driving financial services companies, such as Webster Financial, to adopt SOA as a foundation for their software development initiatives. SOA frameworks use Web services and other open standards to define reusable business functions that can collaborate within larger-scale processes—all with minimal custom code. According to a recent Forrester Research report that examines trends in the banking industry, many companies are either using or examining this type of technology to develop and enhance their information systems. Forrester cited a number of business drivers for these application renewal projects, chief among them the workflow challenges that stem from operating and maintaining application patchworks. "Ever-increasing business requirements, enveloped by regulatory requirements and the changing shape of the banking industry, add to this Gordian knot of managing costs and renewing applications," Forrester reports ("Trends 2005: European Banking Architecture," November 3, 2004). To cut this knot, banks need to strengthen the software architecture underlying their banking platforms. This is particularly true for banks that provide a number of services through multiple channels, such as Web browsers, phones, and call centers. SOA simplifies the connections among these systems, which are often constructed with a mix of technologies from different vendors. Most application integration projects can be tackled in one of two ways. The first is to develop point-to-point connections designed for specific applications and data elements. These types of connections are fast and effective, but they are not reusable, which means that every time you want to connect another application, you have to hardwire another connection. The second way is to create a general-purpose middleware framework that simplifies connections among many different applications. Until recently, however, setting up these frameworks was a huge job, and, due to conflicting standards, the resulting infrastructure wasn't always compatible from one enterprise to the next. Pioneers such as Webster have found a middle ground, by using Web services and SOA, which rely on well-accepted software standards and internet protocols to exchange information. "SOA helps banks manage the complexity of their IT environments by deploying loosely coupled services that work together—providing a more flexible, reusable architecture with faster development cycles and lower costs," explains Christopher Formant, executive vice president of global financial services at BearingPoint. It's no wonder SOA and related technologies such as business process management (BPM) are gaining popularity among financial services companies worldwide. According to Formant, "There is a convergence around SOA and BPM because they allow these organizations to standardize their technology portfolios and integrate a wide variety of corporate business processes. Our research reveals that these technologies are going to be important to financial services companies over the next five years. It's an inexorable trend."