Unlocking the future

America’s KeyBank had already begun its journey to the Cloud when the pandemic struck. Here, its Head of Digital for Commercial Banking, Jonas Ng, explains how the technology not only rose to the crisis, but has given the bank a head start in a vastly-changed landscape

For a nation at the heart of so much of the world’s technology revolution, the enduring love so many Americans have for cash, cheques and plastic cards has been a puzzling paradox.

But there’s now abundant evidence that, with physical restrictions forced on societies by the COVID-19 pandemic, their affection for traditional forms of payment is being replaced.

A recent US survey by respected market watchers McKinsey found that four-out- of-five Americans made some form of digital payment in 2021. But that’s just part of a change in consumer behaviours that’s driving banks in the States to adopt a new infrastructure.

Lockdowns have supercharged a wider dash to digital by organisations, including banks, that previously heavily relied on face-to-face business; and they have had to bring their customers – many of whom had been kicking and screaming against it for years – with them.

COVID has been the accelerator for many financial institutions to tear up traditional banking rule books and enlist the help of third-party, Cloud-based providers to implement the transition to a new digital way of working.

One such organisation is KeyBank, which, with $181billion in assets, a $3.5billion annual revenue, 17,000 full-time equivalent employees and 1,000 branches across 15 states, sits at around number 20 in the league table of US banking institutions.

With a history that can be traced back to 1825, tradition runs deep in the DNA of the Cleveland, Ohio-based bank. However, as Jonas Ng, its head of digital for commercial banking, explains, its pre-pandemic decision to begin moving to a Cloud environment, enabled it to quickly scale up its digital offering to meet demand when the pandemic forced it to temporarily shutter its counters.

“Cloud was the right place for us to be, at the right time,” recalls Ng.

“There was this sea change in the way that customers were interacting with their banks, adopting these new channels.

“The sheer volume of new users on all of our digital assets and digital properties meant we had to scale up very quickly. We have an almost immeasurable amount of data. But with big data comes really big challenges. It’s a monster to try and get your arms around, to manage the data ecosystem

And these were customers who had been resisting those channels for years, even though we had enabled online, mobile and phone banking decades ago.”

Ng, who was working with Cloud technology in the early days of Amazon Web Services (AWS) and Microsoft Azure, recalls how the focus, back then, was on the speed of software development that Cloud enabled – before the penny dropped that what Cloud services were really about was business growth at lower cost.

Describing that moment of realisation, he says: “We were playing around with Cloud computing and platform-as-a-service at the business I was with at the time, just to see if it would make us faster with our software delivery and development methodologies. We were really trying to get to weekly, if not daily, sprints and releases, and we thought Cloud could help us.

“But the reality is that Cloud computing is about efficiency. It’s about scale.

Maintaining hardware and software, developing new applications and distributed applications, and so on, requires a lot of manpower, a lot of time, a lot of money, and a lot of investment. Cloud computing can do all of that at scale and very simply.

“Banks no longer have to divert their own treasure, their own resources, their own expertise towards maintaining some of this apparatus and infrastructure. Instead, they can focus on the things that matter most; the things that are client-facing, the things they make money on.”

Initially, he says, the thought of banks ‘handing the keys to the server room’ to an off-prem third party not under its direct control or governance was considered ‘absurd’. But then came an acceptance that specialised Cloud-based providers, which could operate at vast scale, were much better-placed than individual banks to engage in the continual war of attrition against fraud, and that was a tipping point.

“We started to realise that we were willing to use them because of what we’d get out of it. Because it is really hard for individual companies, with fairly finite resources, in our little siloed environments, to constantly fight this battle.

“A Cloud provider can do it at scale for tens of thousands of clients, or even hundreds of thousands of users of those Cloud services. So, they’re going to be better, if they’re not already better, than anything we are doing on-prem.”

KeyBank, which processes more than four billion records every day, and moves that data to more than 40 downstream systems, was using about 150 servers, with more than 30 petabytes stored in a Teradata environment, when it took the decision to move to Google Cloud in 2019. It had started hitting the limits of what an on-premise data warehouse could do and wanted to open up new analytics capabilities for its teams. In moving to a Cloud architecture, it says it aimed to ‘get the performance of Teradata at the cost of Hadoop (a collection of open-source software utilities), but on a single platform’. By 2020, it was seeing three-to-four times faster query performance, and the cost of those queries was coming down.

“One of the first places KeyBank has tried to invest in, in Cloud solutions, is around reporting, data, analytics and business intelligence,” says Ng. “We have a treasure of data, an almost immeasurable amount. But with big data comes really big challenges. It’s a monster to try to get your arms around. We were fighting an uphill battle for years, just trying to manage this data ecosystem and trying not to let our data lake become a data swamp.

“We started considering whether or not Cloud providers might be the better path to go down for analytics, because, number one, they have economies of scale when it comes to expertise. And, number two, they just have the sheer raw horsepower, the computing horsepower, that is needed, to be able to churn out some of those analytics, some of this business intelligence.”

EMBRACING NEW MARKETS

Since moving to Cloud, KeyBank has made some significant changes to its business.

It recently created a digital national bank specialising in the US healthcare market, having acquired digital lending platform Laurel Road, which largely provides student loan refinancing for newly-qualified doctors and dentists.

To deliver that initiative as well as wider digital transformation of the core organisation, KeyBank employed Confluent’s Cloud-based platform for data in motion, and has set up an internal centre of excellence to help application development teams make the most of technologies such as Confluent and Google Apigee, to drive new products and improve customer experiences.

Healthy move:

The Cloud will power KeyBank's new offer to medics KeyBank is involved in another major project – to develop an advanced mortgage platform which, again, will involve collaboration with third-party specialists. That’s a topic, he says, which is under constant discussion at KeyBank. “The mortgage platform is a perfect example of whether to use Cloud or third parties and hosted-off-prem types of solution. This is a debate that we have continuously among our senior leadership at KeyBank, and it spans business, information technology and digital: ‘Are we going to build? Or do we rent, or buy, or lease, or partner? Or rent with an option to buy? Do we go with on-prem? Do we try to build it ourselves? Or do we go with a Cloud provider, which actually spends every waking minute doing some of these pieces of the project?’. “We’re going to process tens, if not hundreds of thousands of mortgages, but a Cloud provider might very well be doing millions. They not only have economies of scale with the technology; they also probably have economies of scale with the data. Their models, their AI, is going to learn way faster than anything that we could ever hope to stand up by ourselves. And I can tell you that mortgages are a very time-intensive, labour-intensive business for a bank like us. Historically, it could take customers anywhere Banks no between 20 and 120 longer have to divert their own days to get through that mortgage process. “There are a number of treasure, their own things that we are looking resources, their own expertise towards at to make parts of that process that much more efficient, much more maintaining some user-friendly, much faster.” of this apparatus and infrastructure Circling back to McKinsey’s digital payments survey, it says financial institutions will have to continue to step up their digital offer to maintain pace with burgeoning US consumer demand, and that it will be ‘fascinating to see how these digital trends progress in 2022’s survey’. KeyBank is well aware that the digital genie is now out of the bottle. So, what should established institutions do to thrive under its spell? “Leverage your strengths and work with partners that bring other things to the table,” is Ng’s well-informed advice.