What is Interoperability in Financial Services?

Interoperability (or interop for short) has gained popularity in the last few years because it helps simplify user journeys within and across desktop applications. Тhis is a high priority for institutions that need to accelerate their digital transformation and become more efficient.

What is interoperability?

Interoperability was originally defined as information exchange between information technology or systems engineering services. A broader definition considers social, political, and organizational factors that impact system-to-system performance. How does it translate into the financial services industry? Why is interop important and how is it achieved?

At a simplistic level, our view of interoperability is the use of a common language to define how business data is exchanged. For a bank or trading institution, this could be the client name, ticker symbol, venue, etc. More advanced forms of interoperability would then allow systems to interpret this data and perform specific functions on it. They could, for example, update a customer address, place a sell order, or record a series of events from one system to the other.

The concept of interop can be applied anywhere within an enterprise. It has applicability between files, messages, applications, user interfaces, databases, and machines. For those organizations looking to simplify and integrate a desktop environment, ‘interop’ has become the de facto term to describe how apps should work together in the context of a specific task or workflow.

Interoperability and open standards

In most cases, interoperability will encompass informational exchanges between applications from different vendors, using different technologies, or even between different versions of the same system. With open standards, any vendor can implement all standards necessary to make their product interoperate with those from other vendors.

In financial services, one such standard is FDC3 (The Financial Desktop Connectivity and Collaboration Consortium). FDC3 standards were initially defined in 2017 and used by leading organizations across the financial industry. The open-source project is now hosted by FINOS (part of The Linux Foundation) and its members continue to develop it.

Open standards are an important enabler for interop because they allow any vendor to implement them and make their products interoperable with other vendors’ products and services.

A brief history of interop

Interop 1.0

In the early days of this concept, interop’s primary focus was the integration of web applications with other web applications. This allowed for basic data transfer and elementary UI capabilities e.g., sticking windows together. For many use cases, this was sufficient and interop vendors started riding the wave by adding new features on top, such as connectivity to specific applications and streaming data from external sources.
Today, we find organizations still using this approach for web applications. Their deployments tend to be relatively small and limited in scope – but they have become an essential part of the infrastructure. This is what many refer to as Interop 1.0.

Limitations of interop

Unfortunately, most enterprise desktops aren’t that simple, and their application arsenal extends far beyond the web environment. Every large organization has ‘legacy’ applications, sometimes home-grown, singular, and huge, other times from third-party vendors. Written throughout the ages in various programming languages, they represent significant IT spend and, despite their old-fashioned look and feel, are still functional in terms of doing the task they were designed for. As such, they need to be part of more modern workflows too.

In addition to legacy systems, locally installed applications (e.g. Microsoft Office) are also an integral part of a user journey, containing vital spreadsheets, documents, notifications, and emails. These apps also need to communicate with the newly implemented 3rd-party and internal systems.

Further requirements

The landscape for real-world interop is, therefore, a little different. In these days of digital transformation, there are higher expectations from IT, business, operations and, crucially, end users themselves. Now organizations need more advanced interop that goes beyond data integration and encompasses more advanced UI capabilities and UX journey management.

For example, consider a desktop where a user task is triggered by an email in (locally installed) MS Outlook and then used to locate a client ID for use within a legacy CRM system. Scenarios like these are common across banking, telco contact centers, or insurance back offices. With an interoperability platform, these complex workflows can be streamlined, automated, and optimized for efficiency.

Interop 1.0 can undoubtedly help with the web-to-web integration but adding all the different technology stacks will only make a broken user journey slightly less broken.

Interop 2.0 – Desktop integration

A full-service interop platform, however, will include support for basic data exchange between web and web, but also native support for all the other application types. More importantly, the discipline needed to handle non-web applications requires UI orchestration to be super-fast and hugely scalable.

Full service does not end there. The very latest interoperability platforms will also include a set of integral common services to minimize developer effort and deliver frictionless user experiences. These include:

• Universal search (and data mapping) across applications.
• Unified notifications.
• Advanced windows management including role or process-specific workspaces.
• Application connectors for any pre-packaged apps e.g. Bloomberg, Eikon, Salesforce, etc.
• Monitoring of application behavior.
• Predictive algorithms based on historical application usage data to suggest NBA (Next Best Action) for the user.
• This then is Interop 2.0. A set of technology-agnostic application services that simplifies user experiences with minimal development effort. These interopeerability platforms have been introduced to the market as Desktop Integration Platforms (DIPs).

The most advanced platforms have continued to expand with features that support deployments across tens of thousands of desktops and hundreds of applications. This is where you will find:

• Ability to automatically analyze user journeys to find the optimal points for interop.
• Integral automated testing tools;
• Chat-bot handoff;
• Support for mobile devices;
• Frameworks to deploy and configure enterprise application stores;
• Integration with Business Process Management solutions.

Interoperability in financial services

Financial services organizations tend to consider their own use cases unique because they combine large numbers of in-house and third-party applications and these all need to work together to deliver the required workflows.
Concerns over security and speed have made them reluctant to embrace SaaS and yet the dynamics of the business is such that they are under intense pressure to reduce operating costs. Freedom to innovate has also been curtailed because of the need to patch systems to meet all the regulatory initiatives that emerged after the GFC in 2008. Now, however, regulation is no longer setting the regulatory agenda and so firms are looking to invest in full digitalization programs in order to become more competitive.

The debate is now not whether to have a desktop integration platform or not, but whether to build it internally or buy it. Most big banks and other financial institutions still have enormous internal development teams. Most of them are siloed and there’s little central coordination of applications development, deployment, and management.

IT teams in financial enterprises are trapped in the cycle of huge amounts of technical debt while trying to keep up with the vastly shifting digitization agenda pushed by management and employees. If they build their own software interoperability platforms, every 3-4 years they become obsolete and developers need to rewrite them. Buying an interop solution is a big help in that situation. A ready platform gives them the flexibility to use all the technology they want and all the elements will look like everything was built by the same person.

The future of finance

As discussed, interoperability, by definition, refers to the basic ability of computer systems to connect and communicate with one another readily. This includes being able to exchange information between applications, databases, and other computer systems. We saw why this is crucial for the modern economy and for the modern financial services enterprise, in particular. We explored the development of interoperability from web-to-web to web-to-desktop, and desktop-to-desktop integration, regardless of the programming languages. We also covered the benefits this brings to users and developers.

The easiest way to achieve scalable interoperability across large organizations is through the use of a modern desktop integration platform. As the concept continues to go mainstream and infiltrates other vertical markets, we see more financial services firms implementing these platforms rather than building their own internally. This way, they achieve greater flexibility, improved levels of customization, reduction in operational costs, and an ongoing assurance that their platform is up to date.

So where to now? Further enhancements in desktop integration platforms will focus on:

• • Building new application connectors to accelerate implementations across any financial services firm or use-case.
  • Increased use of artificial intelligence and machine learning to analyze, predict, and coerce specific user behaviors.
  • Delivery of open-source platforms to reduce barrier and accelerate uptake.
  • Further alignment with new and emerging standards, specifically in the area of UI frameworks and progressive web applications.

Interoperability in financial services will be the catalyst of industry transformation by making international corporations operate in sync and become more efficient and agile. The movement has had a long journey and it will continue before interop becomes the norm on the financial desktop, but one thing is certain – it’s here to stay.