Mainstream 32 - 21 Oct 2008
If you work for a bank or financial services outfit, you’re familiar with the challenges and risks these institutions face to improve their cost-to-income ratios. The pressures of diminishing margins and increased competition have spurred these companies to innovate – or face extinction.
Many organizations have found that modernizing their electronic payment systems can provide significant efficiencies and cost savings. And now, you can go further by consolidating those often complex and scattered legacy systems to a System z hub to gain central management and the performance, availability and security benefits of the mainframe.
Consolidating scattered systems
Many financial services companies run their most important banking functions on the mainframe, given the need for the highest level of scalability, resilience and security. However, they often place many secondary banking functions, including those focused on electronic payments – fraud detection, wholesale payments, card payments and management, and the like – on UNIX or other distributed platforms. Some companies rely on home-grown systems to shoulder these needs, while others use third-party software.
Unfortunately, running these systems across numerous distributed servers and various divisions or management silos, has created problems that increase costs.
First, banks and other financial services companies often rely on duplicate systems to manage different aspects or channels of their business, such as ATM, point of sale (POS) retail payments, branch, Internet and other common services. In addition to the expense of redundant hardware and software involved, companies also spend more on management, with numerous teams assigned to oversee essentially the same functions within separate parts of the company.
Performance and availability challenges
In addition, running electronic payments systems on distributed hardware impacts the availability of services and increases the costs of enhancing or replacing any component.
That’s because spreading payment functions across numerous servers and platforms can lead to a tangle of connections between systems (especially channel and core banking systems) and add complexity. This “spaghetti-ware” of servers and networked connections has often evolved within a company over decades. Performance and availability can then suffer because of the lack of proximity between systems for handling each transaction.
As organizations look to replace their core banking systems, this complexity can make it much more difficult, complex and costly to replace individual components. With more systems to adapt, the longer-term goal of adopting service-oriented architecture is also made more difficult.
Tapping System z as an enterprise-wide payments hub
Using System z as an integrated, end-to-end hub for these functions can allow banks and other companies to simplify their IT environments, while lowering costs and improving efficiency. Companies can gain advantage in numerous areas:
Consolidation: By migrating electronic payment functions to the mainframe, users can gain the same benefits commonly associated with consolidating other distributed applications to the platform. The strategy lets users eliminate the large numbers of under-utilized distributed servers, often scattered across the company, in favor of a central mainframe. This can also create additional savings on software license costs for distributed servers. Sophisticated workload management can help ensure that a payments hub receives the resources it needs to run real-time and batch window processes to meet response time requirements.
Streamlined management: Labor costs for running these applications on System z can ring up as significantly cheaper than managing the same operations on distributed systems. As a rule of thumb, one mainframe operator can manage the same workload as three IT staffers with a distributed environment, with those costs holding relatively steady as the workload grows.
Ability to scale: As electronic payments continue to grow globally at about 12 percent each year – with some markets expanding at 20 percent annually – the mainframe can easily scale beyond other platforms to shoulder the load. It’s also often the best platform to meet peak demands (with Capacity on Demand services available to scale up or down without disruption) for electronic payments, such as during various shopping seasons or holidays. With the growth of real-time payment processing (rather than batch overnight processing), the ability to scale has become even more important.
Energy and space: Additional cost savings come from using far less energy to power and cool computing systems. System z typically offers 85 percent electricity savings over the equivalent distributed computing power. The platform also reduces space requirements by using one-tenth the footprint of the equivalent mid-range servers and one-half the space of smaller blade servers. With mounting limits on space and energy, consolidating these electronic payment system components to the mainframe can help companies avoid major building and infrastructure costs.
Security: In addition to cost savings and streamlining, banking and financial services companies typically run their most important back-office operations –
deposits, lending, mortgages and account management — on the mainframe for the highest level of security. Moving enterprise payments systems onto the platform, as well, can shift users away from slower networked connections that run between distributed servers – and the potential security breaches created by those less airtight connections. The mainframe offers more cost-effective, integrated connections.
Ability to share data: Using DB2 on System z for all payment application data can make it much easier to understand an institution-wide view from the management information generated. The approach also provides consistent performance, backup, recovery, availability and security of key data.
IBM supporting the need
Until recently, banking and financial customers had few or no options to run integrated, end-to-end electronic payments systems on the mainframe.
To address the need, IBM formed an alliance with ACI Worldwide, a leader in banking industry software for three decades. With IBM’s help, ACI has optimized a new generation of payment solutions on the System z platform, including IBM DB2, WebSphere and Tivoli software and Crypto-chip technology. The effort supports the convergence of retail and wholesale payments through the use of SOA, including the IBM Payments Framework.
As part of the alliance, IBM has provided ACI with technical staff and laboratory support for benchmarking and performance tuning its payments software. To date, products geared to retail banking payments; financial crime detection; debit card management, settlement and MIS; disputes management; and token management, have been modernized to run on System z and z/OS. Plans have been recently announced for the wholesale payments product that includes automated clearing houses (ACH), real-time gross settlement (RTGS), wire and middle office functions.
The collaboration also offers services and help for customers to migrate away from aging systems to more modern, cost-effective ones. This includes trained IBM and ACI staff, and tools, to simplify the migration. Customers who prefer a hosted solution can take advantage of global services which offer ACI software hosted within IBM data centers.
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