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Banks must move to the cloud before it’s too late

This blog entry first appeared on SAP for BankingOctober 2015.

There’s a lot of talk about augmented banking using artificial intelligence and Big Data analytics these days, but what does that mean in reality or, if you prefer, virtual reality?  It’s not clear, yet.  It is obvious that the developing focus upon Big Data and data analytics in financial services is a major and growing field.  I regularly meet the Head of Data or similar these days, and that role is one that has to somehow create an enterprise view of everything.  We’ve talked about enterprise for a long time, and for a long time it has not been possibly primarily due to the internal silo structures of the bank.  Today, that is changing.  More and more, I’m meeting banks that are creating large enterprise data warehouses in the cloud, and that’s a good thing.  It’s a good thing for three reasons:

1)      You cannot refresh core systems unless you separate your content (the data) from your processing (the servers);

2)      You cannot protect yourself against a cyberattack if data is fragmented and offline; and

3)      You cannot serve the customer well in the digital age if you do not have a single view of them.

A quick word on each.

Core system renewal is a focal point of many established banks in developed economies.  Many such banks have had such systems in play for thirty years or more, and are now seeking to rip them out and renew.  To do this, you have to first separate the data stored on those ageing core systems and cleanse that data, so what better time than to start an enterprise data store in the cloud?

Equally, it has been my contention for a long time that the weakest link in many banks is their multiple systems that have been developed during the past fifty years.  Many of these systems exist due to mergers and acquisitions and line of business decisions, and create separation and segregation of focus as a result.  Now, with cyberattacks occurring more and more frequently – the average bank gets hit with over a million a year – the chances of the cybercriminal succeeding are far greater if they can find a crack in the cyberwalls by attacking a discrete, old, batch-based line of business system than if they were attacking a complete, integrated, real-time, enterprise system.

Finally, and the real point, is that we can serve customers far better if we have all their data in one store.  A single view of the customer means that we can ensure consistency of their digital access to the bank whether that be via a mobile app, visit to a store or telephone call.  Again, we have discussed this for years, but can you really provide an augmented digital experience if you don’t have the customer data in one place?  I don’t believe so and, equally, don’t believe that a bank is fit for the digital age if they don’t have a single, enterprise data structure in the cloud.

Why in the cloud?  Well, where else are you going to put it?

We have tried to attain the dream of a single enterprise data store in financial institutions for years and perhaps finally we are there.  That’s not the end though but just the beginning as, once you have a single enterprise data store, the next challenge is integrating all of that external social data with the internal financial data.  That’s the subject of another discussion as, to begin with, let’s just get our internal data sorted out.  Once we have done this, we can then think about how to augment our own data with other information for leverage of our customer reach.

About Chris M Skinner

Chris M Skinner
Chris Skinner is best known as an independent commentator on the financial markets through his blog, the Finanser.com, as author of the bestselling book Digital Bank, and Chair of the European networking forum the Financial Services Club. He has been voted one of the most influential people in banking by The Financial Brand (as well as one of the best blogs), a FinTech Titan (Next Bank), one of the Fintech Leaders you need to follow (City AM, Deluxe and Jax Finance), as well as one of the Top 40 most influential people in financial technology by the Wall Street Journal’s Financial News. To learn more click here...

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  • Hello Chris,

    I think you presume by “the cloud” that a third party may design and/or operate a banking system in a much better, cheaper and safer way than a bank will run functionnaly equivalent legacy systems on its own datacenter.

    It may be true, and it represents a form of IT outsourcing, to use a previously trendy acronym.

    Then what about Business Process Outsourcing? Maybe such a move could enable a bank to focus on its customers, products and data, leaving away the burden of day to day operations?



  • Hello Chris,

    When you follow up with your answer to “Why in the cloud?” please include how to address cross-border regulatory and privacy issues for client information.

    Thank you!