11 minute read
BANKING ON THE CLOUD
When asked during the pandemic how quickly their organisation was able to adapt to industry change, only five per cent of senior banking executives in key European markets said they were exploring how and what they needed to do to be more responsive. Natalie Marchant asks what it will take to move them on – and up
2020 will forever be associated Cloud enables us to be nimble and work with a life-threatening global in step with our clients as they scale.” pandemic, economic turmoil and BBVA Open Platform is part of BBVA’s widespread business uncertainty. push to maximise the potential for open It will also be remembered as the application programming interface (API) year that technology literally platform banking more widely. It is both a came home, with millions of platform bank and a BaaS supplier. Ahead businesses and individuals finding of Europe’s revised Payment Services innovative new ways of working Directive requirements three years ago, together while physically apart. it launched BBVA API Market in Spain,
The lack of flexibility in many existing initially making 11 banking APIs available banking services – already frustrating for for third parties whose services it offered some – was laid bare by the pandemic. to its account holders. The bank initiated More than anything, organisations needed a similar roll-out in Mexico, but its Open to be adaptable, agile and resilient – three Platform is only available so far in the US. characteristics most strongly associated One of the most forceful arguments with Cloud-enabled systems. for adopting a Cloud-based architecture
Having an exclusively, or even partially, is that it frees up organisational space Cloud-based infrastructure means that to focus fully on the customer, enabling new capacity and capabilities can be the business to change, pivot and grow tested and added on quickly and easily, as users seek stronger, seamless digital with minimum disruption journeys and personalised to users. Individual pieces of architecture can also “ The hybrid transformational financial services. The well-documented problems be replaced or updated, approach is really banks have with legacy with little impact on the important because systems sap the mental rest, making for an it ensures clients energy and investment that extremely flexible and unlock value every could be better deployed secure service. In fact, without Cloud it’s hard to imagine platform step of the way Ciaran Chu, on those front-end projects. Pieced together over the years, many on-premise banking or bankingACI Worldwide systems are not only difficult as-a-service (BaaS). and costly to maintain, but
As Abhishek Gupta, also often unable to run and CEO of BBVA’s BaaS update in real time – an business, BBVA Open annoyance for personal Platform, says: “The true customers but a major differentiator is our impediment for SMEs and Cloud-native technology corporate treasurers. As stack. Being built on the recently as 2017, 43 per cent
of US banks were said to still use COBOL, a program language dating back to 1959.
The design of such systems, along with the complexity introduced over many years of incremental upgrades, makes it impossible to employ modern development best practice such as agile methodology and continuous deployment. Upgrades and service additions are labour-intensive and costly on server-based systems.
Nearly everything we access in our lives via the internet – from email to Netflix and social media – exists in the Cloud. But, as core banking provider Thought Machine’s CEO Paul Taylor says: “The one exception is the financial services industry, which is new to the Cloud or, to be blunt, slow to the Cloud.” This is despite Cloud technology being able to solve the fundamental problems that plague it, he adds.
Temenos CEO Max Chuard agrees, describing Cloud as an enabler for new business models. “We see Cloud as a way to differentiate, as a way to offer different types of models for banks. Ultimately, for me, banking in the Cloud is all about the innovation this can bring to the industry,” he says.
So, the advantages of moving away from a server-based system to the Cloud are both technological and organisational, making for leaner and more agile operations. And it also allows banks to embrace innovation from outside the bank itself – for the benefit of the provider and customer alike.
This hasn’t entirely escaped the notice of decision-makers. But, while many traditional players in the sector had
slowly begun to shed their objection to the Cloud (much of it based on outdated concerns around security), the coronavirus pandemic brought the need for change into sharp focus.
A case in point during the crisis was the administration of the UK’s government-backed Coronavirus Business Interruption Loan Scheme (CBILS) during the early stages of the pandemic. Despite many SMEs needing immediate financial support, thousands struggled to access funds quickly enough from high street banks. Of the £350billion set aside by HM Treasury to support businesses, just £5.5billion had been paid out to 34,000 applicants in the first four weeks of CBILS – reaching just half of those that had applied.
And yet, when asked during the pandemic how quickly their organisation was able to adapt to industry change, only five per cent of senior banking executives in key European markets told infrastructure provider Banking Circle that they were exploring how and what they needed to do to be more responsive. Just three per cent said legacy systems
One of the most forceful arguments for adopting a
Cloud-based architecture is that it frees up organisational space to focus fully on the customer
were a substantial block to their ability tap-to-activate numberless cards. to respond and keep up with change. When asked why it felt the need to launch This apparent complacency towards a brand-new bank, Mox CEO Deniz Güven technological transformation was also said Standard Chartered bosses reflected in responses to a question considered whether their existing model about the greatest could defend their market challenges facing banking in the current macro“ Being built on the Cloud as the sector opened up to non-traditional environment. More enables us to be players – and the answer, than half (57 per cent) nimble and work in simply, was ‘no’. highlighted the impact of step with our clients Cloud-native banks regulation followed by the as they scale like Mox are acutely aware implications of constantly Abhishek Gupta, that technology is a evolving customer expectations (53 per cent) BBVA Open never-ending journey – and providers of Cloud-based and pressure on pricing Platform systems and services are and margins (36 per cent). keen that legacy banks Pace of technological understand it’s one that can change came in fourth begin with a single step. It at 32 per cent, followed doesn’t mean a wholesale by transitioning from move to off-premise traditional to digital systems (indeed, maybe delivery channels at a it never should be one or similar percentage. the other), but without
Whether this is indicative that many Cloud-enabled technology, such feel issues have been addressed or that institutions won’t be able to compete the pandemic has thrown up more with the new breed of platform banks. pressing problems, it is not easy to say. And, while they were cushioned against But what is worth noting is that transition the current crisis by strong balance to digital was a concern for about half of sheets, they might not be able to commercial banks, compared to just one withstand the next shock unless they in five payment service providers. embrace that idea.
Conversely, one banking giant that has As Elliott Limb, CEO of ‘composable definitely recognised it cannot transform banking’ provider Mambu, puts it: quickly enough for one of its markets is “Digital means building for what Standard Chartered. In response to the individuals need and building for an Hong Kong Monetary Authority’s Smart unknown and unpredictable world.” Banking initiatives, it recently launched During the pandemic, Mambu ably virtual bank Mox to selected external demonstrated that point by responding customers there, with plans for wider to rapidly changing requirements – such release later this year. as payment holidays – consulting all its
The app-based bank runs on Thought relevant customers then building and Machine’s core, Cloud-based platform and rolling out a solution to each of them follows the traditional challenger model within two to three days. The quick – with instant remote onboarding, turnaround stands in stark contrast to goal-oriented spending and the administration of the Government’s shopping calculators. Mox support loans which were, by and large, also plans to launch run over legacy systems and were heavily criticised for failing to respond quickly or comprehensively enough.
Cloud ultimately provides many advantages for banks that were not born there, but moving to it undoubtedly requires massive cultural and technological change, internal reorganisation and investment. Right now, the uncertainty caused by COVID-19 has slowed, to a greater or lesser extent, such strategic plans, despite the pandemic has proven the move needs to happen. Banking Circle’s white paper suggests that some banks think they have already done enough to improve those three key differentiators, adaptable, agile and resilience.
Ciaran Chu, head of public Cloud at global payments provider ACI Worldwide, has his doubts that they have. ACI works with many well-established international banks and is so convinced that Cloud-enabled services are the future that it is positioning itself in the Cloud to demonstrate the advantages to its clients. This, it believes,
Launched in partnership with telecoms providers HKT and PCCW and Asia’s largest travel agency, Trip.com, Mox aims to deliver a range of lifestyle benefits alongside retail banking products in order to create a truly personalised experience.
From its very inception, Mox has aimed to do something different.
Ahead of its recent brand launch, the challenger bank interviewed some 2,000 people and came to the conclusion that they all – regardless of age – wanted new, better experiences.
So, among other things, Mox has promised Asia’s first all-in-one, numberless bank card, alongside more traditional challenger bank offerings such as spending analysis and goal-based saving. There are no minimum balance requirements or hidden fees.
“What we are trying to do, with the help of digital technology, is to create the same and best customer experience for everyone,” says CEO Deniz Güven.
“Generation Mox is becoming like an will help them reduce costs, increase scalability and improve speed to market by making them more agile. It recently launched its Universal Payments product on the public Cloud through Microsoft Azure, alongside on-premise solutions.
Chu believes the pandemic has definitely accelerated many banks and other providers’ transition to the Cloud, but stresses there is no one-size-fits-all approach for its deployment. Instead, he advocates his clients adopt a hybrid transformational programme to ensure they leverage the best of their on-premise solutions throughout the process.
“Then you can grow your business out and focus on transformation,” says Chu, “as opposed to getting involved in a big migration or setting up a new solution in the Cloud and then thinking ‘am I going to spend the next 18 months just recreating what I had on-premise?’ attitude… a behavioural approach. You can be 18 or 80, it’s not important for us. We try to understand customers’ needs and their pain points.”
All in all, Mox identified 87 of those pain points during its early market research, which inspired the team to create a new service-led bank, a radical alternative to Hong Kong’s traditional offering. And, to
“The hybrid transformational approach is really important because it ensures clients unlock value every step of the way, whether that’s faster time to market, reduction in cost or being able to launch more surrounding services that enable them to differentiate themselves.
“The big thing to watch in the next six-to-12 months,” adds Chu, “is operational capabilities. The architectural vision is well-signposted: containerised solutions, consumed via open APIs with a low-cost database that allows you to scale up and back as needed and can be plugged into surrounding services. You get to that by breaking down your solutions, ensuring that you’re leveraging all the native capabilities of Clouds. The key there being that you don’t get locked into a specific Cloud. I think the regulatory advisory, in the next few years, in any case will be for the
Mox goes to the digital max
Standard Chartered-backed and Cloud-enabled Mox is one of the first eight digital-only banks to be granted a licence by the Hong Kong Monetary Authority
ability to seamlessly move between them.”
deliver it, Mox opted for a Cloud-native, customer ledger approach, with its core system provided by Thought Machine, and Feedzai key among a number of other vendors providing additional services.
Güven is a firm believer that the bank’s Cloud-based technology stack brings with it distinct advantages over primarily server-based banking. Chief among those are flexibility, portability and future-proofing.
“Changing the technology structure of an international bank, or even a regional bank, is like changing the engine of an aeroplane while it is flying,” he says.
“In Standard Chartered Group, we don’t want to change the big engine. We want to build small aircraft to attack some markets – and Mox is an example of that.
“The magic of Mox Bank is that we are a separate, standalone, licensed, owned bank and this is extremely important because it means we have the flexibility to run quickly and with a different culture.”
