The Cloud is ready for the Banks but are the Banks ready for the Cloud?

Of all industries banking has been amongst the slowest
to migrate core processing to the cloud. There is no doubt that the few cloud
providers that started their businesses purely designed for the cloud have
sophisticated, complete and secure offerings so what are some of the reasons
for banks to consider using public cloud services?

Reducing is always given as the number one reason to
switch to the cloud and there are plenty of business cases that prove that to
be true. Not least of all the ability to close data centres and reduce the
headcount that is required to support IT infrastructure. On top of that is
reducing the capital tied up by IT and deploying it in a more effective way for
the business.
The ability to flex and pay for only the resources
that are consumed whether it is storage, memory or processor power is a
significant benefit for banks as all On Premise banks have very large
quantities of redundant capacity both for operational and disaster recovery
purposes.

As a simple example, the ATM network needs to
comfortably support peak volumes. In the UK this is typically around 1.10pm on
Christmas Eve where there is a huge spike in the number of people withdrawing
cash for the Christmas period. This capacity is not only required in the
operational system but also in the disaster recovery system should failover be
required. Customers will certainly remember banks that weren’t able to dispense
cash on Christmas Eve. For the rest of the year much of that capacity will
remain idle with maintenance bills and licences still being charged.

For Paypal there is nothing to fear from Black Friday
or Amazon Prime Day, when enormous spikes are experienced. Paypal uses public
cloud services and only pays for the volumes that are used and only for when
they actually used it.
Scale Public Cloud providers have the numbers of data
centres and nodes that banks simply cannot afford. They have the networks and
dark fibre because they need them to provide their service. Because providing a
resilient service is critical to staying in business and because their
businesses were created and designed from day one in the cloud they have the
advantage over those who have started from an on-premise mindset and move to
public cloud.

It is unheard of that Amazon, Google or Facebook are not
available? Public cloud providers do not put out notices to say that there services will not be available for several weekends while updates are made.

Banks are under constant daily attack from hackers
trying to break through their security and steal customer data or hold banks to
ransom. As has been seen banks can and have been breached. However the
providers of cloud services whose sole business is the provision of secure
services to customers have much deeper pockets to hire the best and to invest
in providing the most secure Identity & Access Management systems. Because
their systems were designed for the cloud from day one and they employ the
smartest technical people with the same mindsets as the hackers they have
proved in many respects to far more secure than on-premise. If they weren’t why
would they be used by the security services?
With increasing mobility of both customers and
employees being able to access systems from anywhere in the world on any device
at any time is increasingly being demanded. A public cloud solution makes this
far easier than an on-premise solution.
By moving to a standard public cloud architecture, the
overall IT architecture is simplified. Most banks have grown over time and so
has their banking architecture which has led to a heterogeneous architecture
made up of a mix of hardware and software of different ages that requires
integration.
A concern that has been often expressed is that the
regulators would not approve banks using public cloud. However that is not
correct – Monzo is an example of a challenger bank that is running entirely in
the public cloud.

Even in more conservative countries such as the Kingdom
of Saudi Arabia the central bank, SAMA (Saudi Arabian Monetary Agency) has
approved the use of the public cloud by banks.

Not only that but Central banks and regulatory bodies
such as FINRA are big users of public cloud as it gives them the ability to
work on large datasets, structured and unstructured data, supercomputing and
analytics tools to carry out tasks such as identifying fraud and suspicious
trading in real-time and only paying for it when they need it.

Designed
for Mode 2 Development

As increasingly banks look to innovate using Mode 2
Development methods then setting up and managing environments and tools to
manage this is made much easier when using a public cloud provider. For those
providers who have designed their businesses for the cloud from the start Mode
2 has always been the market they have served. All the exponential
organisations started out being developed using Mode 2. It is far easier for a
Mode 2 cloud infrastructure provider to move to Mode 1 (traditional
development) than it is for a Mode 1 organisation to move to the provision of
Mode 2 cloud services.
The large scale public cloud providers have been where
the innovation around new technologies has all been taking place whether it is
AI (Google DeepMind), Voice (Amazon’s Alexa, Microsoft’s Cortana), Image
Recognition (Amazon x-ray), Autonomous Vehicles (Google Waymo), Augmented
Reality (Google Tango, Pokemon Go) or Gaming. These are the technologies that
banks and other financial services providers need to embrace if they are to be
relevant and able to compete.

Public cloud is ready
to enable the future of banking. The challenge for banks is to embrace and
exploit what public cloud offers.

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