Cloud: Elixir For Banks' Digital Transformation

John Bertrand

Financial services are a stovepipe industry. Built on bespoke legacy systems, installed before the Internet, with a narrow business focus, costumed with minimum security, and sized for peak volumes. These systems are completely at odds with today’s open and mobile banking environment and the need for a zero trust model (e.g., blockchain).

Cloud technology is the salvation of the financial services industry. The cloud’s elasticity brings a new level of efficiency by matching volume to capacity, plus it gives enterprises protection against cyber crime and is compliant with data regulations.

Change is always difficult, though. In one bank’s business move involving cloud, a trade union said, “Even the bank admits that the migration of the accounting details of 20 million customers onto a private cloud to be run by staff based offshore could ‘weaken existing security controls and adversely [affect] the confidentiality and integrity of bank data.’”

The opposite will happen; here are the reasons why.

Cloud suppliers know brand reputation is key. The biggest threats to their reputation are the cyber criminals. To stay in the cloud business, providers must constantly remove this ever-present and changing danger by strengthening security and controls. Cybersecurity is an imperative to stay safe.

Banks, on the other hand, must bring these same cybersecurity activities to their own technical infrastructures to stay safe from cybercriminals. Once GDPR takes effect in May 2018, by law banks will need to show the regulators and clients where client data is housed, who can access it, who is accessing it, and how they are separating public and private information.

When banking business operations are hosted by multiple standalone systems, both cyber defense and data warehousing have to occur across all of them, and each system must be dealt with individually and also linked to the enterprise. This has commonly led to multiple database copies and interfaces to many applications, resulting in a technical landscape that is frustrating for both employees and customers, not to mention has more vulnerability and opportunity for inconsistency.

On the other hand, cloud suppliers are raising the standards around security. Cloud system architectures use many different cybersecurity applications to combat a myriad of threats, isolating and disarming them as they are discovered, protecting the entire cloud community from being impacted by that specific threat again.

Compliance with the growing data use and privacy regulations presents similar issues for the banks. Banks have consistently underperformed with information given to them. Most information is trapped in the silo systems, and extracting updated data is difficult given banks’ batch processing activities. Given our demand for instant responses, driven by the pervasiveness of the mobile phone, this is proving to be problematic. Most banks “shadow post” transactions to create the illusion of real-time, but clients don’t know their actual position until the next day.

Cloud technology provides the opportunity to move straight to real time, skipping a generation of legacy banking solutions and batch processing, and meet our expectations for live data. Today’s issue is who has the information and what is being done to safeguard the owners from financial loss or reputational blemish.

The Luddites‘ goal in 1811 was to preserve existing practices by enforcing old legislation and destroying the modern equipment coming into the market. Today there are an estimated 2.6 billion smartphones in the market; to avoid the Luddites’ fate, we need to try something different. It is time to move with the technology and embrace the future. The cloud’s elasticity, the unimpeded flow of data, and cybersecurity are our elixir for digital success.

To find out more, register now for the Financial Services Forum, which will be held July 4–5, 2017, in London.