ACI, Big Blue Deposit SOA Into Financial Services

IBM has teamed with ACI Worldwide, an electronic paymentsoftware company, to develop a payment system powered by IBM’sopen standardsbased System Z platform. The new offering will include IBM’s DB2 database,WebSphere middleware and Tivoli management software as well as itsCrypto-chiptechnology. It will also run a specially optimized version of AIC’s payment processingsoftware.

The optimization supports the convergence of retail and wholesale payments through the use of service oriented architecture (SOA), including IBM’s Payments Framework, the companies said.

The partners see their expanded alliance as an answer to financial institutions beset with a rapidly aging payments system spread over an infrastructure cobbled together from disparate platforms that have become increasingly expensive to maintain.

“Financial series companies are looking for new ways to modernize outdated payments systems due to increasing transaction volumes and regulatory and IT cost pressures,” said June Yee Felix, general manager of banking solutions and strategy, IBM. “Payments systems running on IBM System z and ACI payments software address these issues and provide our joint clients with world-class transaction processing performance and the flexibility of SOA through next-generation mainframe technology.”

Financial Transaction

In the deal, ACI will optimize its Money Transfer System and BASE24-eps payment solutions to take full advantage of IBM’s hardware, software and services. The new version of ACI’s BASE24-eps software for System z will acquire, route and authorize payments online. It will also include a wholesale payments solution to help users meet the needs of pending Single Euro Payments Area (SEPA) regulations; and a solution for real-time fraud detection across the enterprise.

The software maker will also take on new technical staff and laboratory support from IBM for benchmarking and performance tuning its payment software, IBM said. In addition, the two companies will join forces to create a “worldwide team of sales and technical a specialist whose goal is to push out ACI’s software on IBM hardware and will also include IBM ‘migration factory’ services to provide banks with trained staff and IT tools to simplify migrations from legacy payments systems.”

ACI also plans to host its integrated software globally using IBM’s data centers for on-demand access to ACI payment solutions for users who prefer a hosted solution to one managed in-house.

The second phase of this joint venture will include optimized solutions on System z for dispute management, smart card management, online banking and trade finance. The two companies will also offer a broad payment hub solution that capitalizes on the IBM Payments Framework and its SOA foundation for payments processing.

Counting Houses

ACI provides payment systems software to more than 110 of the world’s top 500 banks as well as a number of large retailers and payment-processing companies, many of which are using antiquated systems.

The partnership solves a growing problem for ACI, which has adopted an evolutionary strategy that tries to knit together all its payment systems together into two enterprise payment systems, said Aaron McPherson, an IDC analyst.

“These would take all the different payment types and pull them together into a common payments hub, if you will. So, instead of having different processing systems for debit cards and credit cards and wires and ACH, etc., you’d just have one system that would process everything and this would give you a lot of operating efficiencies because you wouldn’t have to have duplicated functions for things like fraud detection, exception handling, processing errors and things like that.”

The combined systems would make it much easier to catch fraudsters because banks could see patterns of fraud across payment types. “That’s just a couple of the benefits that come from bringing all their payment systems together,” McPherson told the E-Commerce Times.

However, ACI’s existing customer base of banks and other financial organizations have been more than a little leery about upgrading to the new system ACI has been developing for the last 10 years from its NonStop system developed in partnership with Hewlett-Packard.

“There are a couple of reasons for this. One is the old legacy tandem NonStop systems are so reliable that it is difficult to get customers to move off of them even if the new generation of software is superior and a lower cost to operate. It’s a tough sell to get banks to move because payments tend to be an area where banks are reluctant to make changes because it’s one of those sensitive areas,” McPherson explained.

“If payments go down because you made a bad decision about your upgrade, that tends to end careers,” he pointed out. “So banks are skittish about it, especially when you’re talking about bringing all payment systems together. That doubles the anxiety.”

ACI’s issue was that it was not only asking its users to move to a new technology platform of SOA and give up some of their familiar ways of doing things but it was also asking them to give up a tried and true platform that they had grown used to and trusted.

“The significance of this announcement is that [ACI] has definitively chosen. They’ve thrown in their lot with IBM System z and chosen IBM to be their technology partner on SOA. They clearly see IBM as the partner to help them persuade the banks that this is real and will work. It will give them the credibility to get the banks to finally make the leap to these new systems,” McPherson said.