Financial operations struggle with interoperability, open source and the cloud

Most businesses started being disrupted by the clouds years ago. Entertainment? Cloud-based streaming changed everything. Telecoms? 5G runs on OpenStack clouds. Office work? Microsoft would much rather have you subscribe to Microsoft 365 than buy Microsoft Office 2021. But financial applications, that's another story… until recently.

In the early 80s, personal finance programs like Quicken were proprietary and ran on MS-DOS-powered PCs and the Apple II. At about the same time, the first stock market software, the Bloomberg Terminal, appeared. It was both proprietary and, as the name says, a true terminal. The decades went by. Surprisingly, by and large, financial software stayed stuck with proprietary code and platforms.

Today, things have changed. FinOps, a portmanteau of 'Finance' and 'DevOps,' is taking financial management software into open-source and the cloud.

Why? It's the same reason other businesses embraced the open-source development approach and the cloud: It makes solid business sense.

As Colin Eberhardt, bespoke software developer company Scott Logic's technology director, said at the Open Source in Finance Forum 2022 in Manhattan, "Investment banks used to create their own clouds and even invented their own programming languages. But as open source has become pretty much ubiquitous, creating your own custom cloud and programs has become far less valuable." 

Another important factor is that the old-school vertical proprietary programs locked their data and processes in proprietary formats. Besides the brand names of finance, banks also wrote their own software and created their own data formats. The result? None of these programs, nor their data, could work with each other. This infuriates accountants who must try to incorporate incompatible data formats and transactions into common formats to this day.

It's all about interoperability

This is no way to make money. In today's financial world, it's all about interoperability, while making the most from the cloud investments. That means besides simply using open-source software and cloud, financial companies need open standards.

Unfortunately, this is still a work in progress. The most important of these proto-standards is Financial Desktop Connectivity and Collaboration Consortium (FDC3). This set of standards consists of open API specifications for messaging between cloud services and desktop applications. The goal is to "develop specific protocols and taxonomies to advance the ability of desktop applications in financial workflows to interoperate in a plug-and-play fashion, without prior bilateral agreements."

Specifically, these APIs can invoke actions between applications, and provide a standardized context data format, a REST-based App Directory standard, and standardized API operations for a desktop agent.

Considering today's financial transactions still includes copying and pasting between applications and exporting/importing CSV files, firms such as Citi, J.P. Morgan and RBC are all backing FDC3 standards.

These APIs and standards are being deployed for the first time in several applications, including Cosaic Finsemble Glue42 and FDC3 Sail. But, while these programs use some of FDC3 standards, they don't play that well with each other. True, they enable applications to work in sync and share context with each other, but they do it by wrapping stock traders’ separate applications in containers. They don't trade data or interoperate well with each other.

That's where a beta cloud service Connectifi comes in.

FDC3 and Connectifi creator, Nicholas Kolba explained, “What I wanted to do was create interoperability that’s not platform-dependent, not desktop-dependent, not container-dependent, not install-dependent; that can run anywhere, and that’s truly native to the cloud.” This addresses the FinOps' data interoperability pain point head-on.

The goal, Kolba continued, is to enable users to have a meaningful workflow that unites desktop and mobile work into a “continuity of state.”

For example, users can use a mobile app that picks up cloud data and context. This lets them make a stock buy or sell decision, execute the trade and see the results reflected on their desktop program when they get back to the office.

With true cloud applications, such as Microsoft 365 or Google Docs, this is the natural order of things. With today's FinOps programs, that's not the case.

However, progress is being made. As Gabriele Columbro, the Fintech Open Source Foundation's (FINOS) executive director, said at the Open Source in Finance Forum, the FDC3 conformance testing framework is now working. Two of the three major desktop application interoperability programs, Cosaic Finsemble, Glue42 and FDC3 Sail have already passed.

Columbro added that while cloud and open-source adoption is "laying out the necessary building blocks for an organic, growing and sustainable open community in the industry," there is a lot work still to be done to reach full maturity.

This won't happen quickly. As Adaptive Consulting CEO Matt Barrett, explained, “Decision-making in big banks is slow. Buying cycles are slow. Budgets are limited. If there’s uncertainty about which vendors or standards to use, and there are competing priorities for those resource budgets, people will just spend their money elsewhere.”

Still, ever so slowly, practical open cloud standards for the next generation of high-end financial programs, banks and financial institutions are coming together.