Interoperability used to be the kind of back-office plumbing most people only noticed when it broke. Now it is turning into a front-page issue for finance and regulators alike.
Banks and market infrastructure firms are trying to move money and data across more systems than ever. At the same time, policymakers are pressing for more competition, more portability and more transparency in how financial services work. When these forces collide, the result is often the same: delays, duplicate checks, higher costs and more chances for something to go wrong. In a market where customers expect instant results, slow handoffs between systems are no longer just an IT problem. They can become a business problem, a resilience problem and, increasingly, a regulatory one.
That is the backdrop for a new post from Alvarez & Marsal’s Financial Services Industry Group, part of its “Rewiring Finance” series, which argues that interoperability is becoming a key separator between winners and laggards. Big platforms used to win by being able to do the most things in the most places. But today, the challenge is that finance has become a web of connected services, vendors and tools. In that environment, the ability to connect cleanly across systems matters more than sheer size.
“In financial technology, breadth used to be the moat,” the authors write. “But as systems age and ecosystems proliferate, interoperability—not breadth—has become the competitive advantage.”
A&M’s piece makes the case by describing what a modern financial transaction actually looks like behind the scenes. One trade, it notes, can pass through order management, risk, financing, collateral, accounting, reporting and compliance systems. Each stop creates friction because systems do not speak the same language, so firms rely on translation layers and reconciliation work.
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The post says the results are predictable: “increased cost, latency, and operational fragility.” In other words, the more systems involved, the more time and manual effort it takes to keep everything aligned, and the harder it is to move quickly without breaking controls.
To fix that, the post points to a design approach that emphasizes modular building blocks and standard connections. It highlights three building blocks: open APIs, shared data models, and event-driven flows that keep systems synchronized in near real time. The authors compare the target state to the internet: modular and interconnected, with components that can evolve independently while still communicating smoothly. If every team builds custom connections to every other team, complexity explodes. If everyone uses the same “ports” and shared definitions, change gets easier and errors drop.
Speed is a central theme, and A&M tries to quantify why it matters. It links processing delays to higher cancellation rates in trading workflows. The broader point is not just about high-frequency trading. It is about compounding delay. When one slow step feeds another, the entire chain becomes less reliable. That is exactly the kind of operational fragility regulators worry about when they talk about resilience in critical financial infrastructure.
The post also ties interoperability to the industry’s next big move into using AI and advanced analytics in day-to-day operations. It argues that AI cannot scale inside a firm if data is inconsistent and systems cannot share real-time context. “Crucially, this interoperability is not just an architectural advantage, it is the foundation for intelligence,” the post says. AI at scale depends on consistent data, real-time event flows and shared context across systems.
It also points to an execution gap: despite high ambition, only 31% of organizations are on track with implementing data-enabled AI integrations.
The next decade, A&M suggests, will favor firms that become the easiest to connect with, not just the biggest. It describes an “inflection point” where interoperability moves from a preference to a requirement for scale and resilience, even as many firms remain constrained by fragmented data models and legacy operating structures.
In practical terms, that means more investment in shared standards, clearer data-sharing agreements, and stronger governance around how systems interact. It also means more regulatory attention, because when interoperability becomes the way markets run, its failures stop being isolated outages and start looking like systemic risk.
That is why interoperability is moving out of the server room and into the strategy meeting.