Banks in the cloud — yes or no
Written by Josip Deak (Team Lead at ABC TECH Group)
Life in clouds is growing rapidly. It became rather normal for nowadays businesses to be in the cloud. Even if we put aside the covid-19 pandemic turned our lives around and was a huge ‘online’ driver, it brings such neat opportunities to improve our businesses. On the other hand, banks seem cautious on cloud switches. Is it cybersecurity, strict regulations, cost, or something else that bothers them? So, what will tomorrow bring: banking in or out of clouds?
Why not
Cloud is one of the nowadays buzz words, but behind cutting edge technology lies the opportunity for banks to innovate (e.g., by operating globally in real-time on a blockchain), extending, and enhancing individual customer experience using personal finance assistants like Alexa, Google Now, or Siri, reach customers globally (e.g., Alipay), reduce infrastructural and IT costs including a switch to utility-based pricing (pay per use), perform more complex risk calculations through big data and machine learning capabilities using a wide range of parameters and simulations, and react and adapt securely much faster in these challenging times. So, why are some banks skeptics, what bothers them? Some regulators have strict demands on IT solution providers and request data should be stored within the boundaries of the country where they are collected, and who is permitted to access it. Some global cloud service providers like Microsoft and Google opened data centers in new countries to help banks meet such regulatory requirements. Even though regulators are extremely cautious and respond slowly to market change, some of them have already made the first steps and gave recommendations to encourage banks to cloud and we may see some requirements regarding cloud standards like in card payments soon. On the other hand, there lies a data privacy risk (risk of breaching client identifying and other (non)financial sensitive data) as well as threats of possible cyber-attacks as the most commonly addressed issue for cloud skeptics. So, big global cloud service providers take special care of security and make it part of their business process and thus invest more to drive better solutions than many international companies can. As Gartner forecasts through 2025, 99% of cloud security failures will be the customer’s fault. Embracing the cloud does not mean just switching company data and apps to the cloud. “Full” switch to cloud implies a strategic change of internal processes (transformation of what and how employees do daily tasks), so it influences as well on business processes, infrastructure, organization, and corporate culture, which builds up the cost of transition on one side, but results with faster, more agile, and flexible working culture, ending with cheaper and more robust solutions on the other side.
Tomorrow or today
Benefits and opportunities clearly outweigh the risks, so, the question is not will banks go to clouds, but rather when. Is it better to be frontier or wait for the common ground? Let see if we can find something up and running in the banking industry today besides fintech companies and solutions like Revolut or Amazon Pay. Barclays in cooperation with Salesforce implemented the mortgage application process on the Salesforce platform. You may think, great western heavyweights, are throwing their first rocks with clouds. What if we go east and find something more holistic? Banca Transilvania in partnership with Microsoft to enhance customer experience created Azure-powered bots Livia and Raul who give personal advice to customers by tailoring specific individual needs and situations. As we can see, banks are coming too.
