Banking on the Public Cloud?

“Digital first.” It’s the stated ambition of any modern business.

And yet, for an industry where digital data is the primary asset -- the banking industry -- “first” is not always the first word that comes to mind.

True, big banks were among the first businesses to invest in mainframe computing back in the twentieth century. They have been notoriously cautious, though, about migrating to more advanced twenty-first century cloud platforms. The reluctance has been partly due to the readiness of the technology itself, and partly to the understandably cautious mindset of the C-suite.

Big banks that have been willing to begin the cloud journey (such as ABN AMRO in Europe and Citibank in the U.S.), have been rewarded with lower costs, faster innovation and improved customer satisfaction.

For bank CIOs, who typically drive cloud adoption and must sell its business virtues to the CFO, the COO and other C-suite executives, the key is to build the business case for moving to the cloud. That means understanding and underscoring the value of the swift, continuous innovation and the rich data insights cloud-based banking makes possible and communicating these virtues in terms of outcomes -- in language that non-technical leaders can rally behind.

Part of building this business case means discussing the cloud’s benefits for the bank’s three main constituencies: customers; the broader ecosystem of business partners who are crucial to service delivery in today’s banking world; and the bank’s employees and executives.

Compared to the old enterprise software model that still encumbers many banks, a move to the cloud greatly reduces capital expenditures. In fact, a cloud migration is a great opportunity for a bank to review how much of its own hardware and how many software site licenses it no longer needs.

Faster innovation and lower costs are a great start for any business case. And tech giants such as Google, Microsoft and AWS have set a highly competitive benchmark with public cloud, introducing new capabilities and services at a speed that fosters rapid innovation for their customers -- and that cannot be matched by companies trying to go the journey alone.

What makes this move seemingly a greater decision is that banks are the custodians of customers’ most valuable digital assets: their wealth and all the sensitive information that surrounds it. But here’s the selling point that can help overcome C-suite caution and accelerate the business case. During the last 18 months or so, the capabilities of the best cloud providers have reached a level of security and reliability that largely meet the rigorous regulatory requirements of the banking world.

So, how to proceed?  It’s wise to plan cloud migration as a gradual process, department by department, portfolio by portfolio. The bank’s core operations will probably be the last to take the leap, if they decide to migrate at all. Those core systems, typically based on the mainframe, may derive little economic or business benefit from a move to the public cloud.

The business case for other applications, though, comes down to whether the migration will save money or generate additional value -- or both. And given the state of current technology, there is no longer any reason to delay targeting the customer-facing applications that would quickly benefit from the speed, efficiency, elasticity and continuous innovation of the cloud.

When ABN AMRO created a secure portal to enable customers to access accounts and services through their smart devices, it also enabled various third parties to connect through secure application programming interfaces (APIs). These third-party fintech providers are creating a variety of new business offerings in partnership with the bank. As a group, these offerings are growing faster than traditional banking business. One such new service is Tikkie, a payment app used by retail store owners in Amsterdam that allows shoppers to scan items with their smartphones and settle their bill on their way out.  

Barclays UK has also embarked on a massive digital transformation journey. It was triggered by the Open Banking reforms that came into force in the UK in January 2018, requiring big banks to open their databases and help customers share personal information on things like spending and payments with other authorized financial service providers. Barclays sees the transformation as part of the “digital thinking” paradigm it believes the industry should embrace. Rather than viewing banking regulation as a constraining force, Barclays urges industry professionals to understand that they and regulators are working toward a common goal: customer centricity.

Further, many large banks are experimenting with artificial intelligence and machine learning to relieve bank employees of some of the time-consuming and highly repetitive tasks, which lets them focus on more creative work and customer engagement. Intelligent assistants help staff perform sophisticated risk analysis. However, for customers, self-learning chatbots can help customers with many routine services. ABN AMRO’s financial advice app, Grip, can give clients insights into their income, spend, savings and investments.

For the C-suite executives themselves, the business case for the cloud comes down to the company’s most essential asset: the value of its brand. Only through the innovations and capabilities that cloud can provide will the bank be able to deliver the cutting-edge experiences that today’s digital-first consumers and investors expect, and that tomorrow’s will demand. 

Suranjan Chatterjee is Global Head, Cloud Apps, Microservices & API for Tata Consultancy Services.