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Banking in the Cloud

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One of the surprises I have had in my discussions with banks that are doing digital well, is how all of them seem profoundly committed to cloud-computing. Some more than others, as one of the banks I spoke to wants to achieve over 80% of their IT infrastructure, software and services to be private and public cloud based. Amazing.

I say amazing as I remember conducting research ten years ago (showing one’s age), and most financial pundits were vary wary of anything cloud related. I think many still are. In fact, we get different views.

For example, the Prudential Regulatory Authority (PRA) defines cloud as outsourcing, and informs financial institutions to comply with the same regulatory obligations as it would for outsourcing. Now, we also have GDPR (General Data Protection Regulation) and PSD2 (the second Payment Services Directive) that also have requirements for privacy and controls over data.

All of this makes it easy to say that using cloud services is too difficult. But it’s not.

In fact, most of the banks view the use of Amazon Web Services (AWS), Microsoft’s Azure, Netflix Content Delivery and Aliyun, the Alibaba Cloud, as being essential for Agile, another core component of their operations.

The reason is that it allows the bank to manage loads, capacity and expenditure in a far easier way than they could if they developed and hosted and internalised everything. Now, I’ve known for ages that cloud allows banks to move to OpEx (Operational Expenditure) for their computing needs, rather than CapEx (Capital Expenditure), but I hadn’t expected to find this consistent them of cloud usage amongst the innovative digital transformers.

It’s even true of the largest banks, like JPMorgan Chase. JPMorgan created its own private cloud in 2016, according to the Wall Street Journal, and moved some applications into the public cloud in May 2017.

According to Business Insider, “that makes it ones of the industry's pioneers, with many in banking still wary of moving data and key applications into the cloud due to cybersecurity, operational and regulatory fears.”

But I think this goes back to the heart of what many in banking have yet to understand that doing everything yourself, controlling everything yourself, building everything yourself, developing everything yourself … just doesn’t work anymore.

I know so many banking people who fear letting go. They worry intensely about allowing third parties to have their customer’s data for fear of the regulator, whilst the regulator is pretty ok with it all.

It reminds me of my favourite story from Michael Harte who was then the CIO at Commonwealth Bank of Australia (CBA) back at the start of the decade. He presented to the Board the idea of moving most of the bank’s back office to Infrastructure-as-a-Service (IaaS). The Board considered this and threw it out, saying the regulator wouldn’t allow it. Come back with a different plan.

Six months later, Michael presented the same plan to the Board. The CEO was irritated and asked why the hell was he presenting the same plan when it was obvious the regulator wouldn’t allow it. Ah, said Michael. Funny you should mention that. And at that point, he brought in the head of the Reserve Bank of Australia to the Board meeting, who endorsed the IaaS plan and said it was fine.

As a consequence, CBA moved to IaaS and saved 35% of their operational costs, as well as becoming far more agile.

In summary, if you want to be a digital bank, move the bank skywards and into the clouds.



Chris Skinner Author Avatar

Chris M Skinner

Chris Skinner is best known as an independent commentator on the financial markets through his blog,, 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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