European banks' race to shared services, open source

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!