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What is banking in the cloud?

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Over ten years ago, I started blogging about cloud computing and financial services. Many banks dismissed the idea back then as “the regulator wouldn’t allow it”. Then the regulator did allow it in some countries, but banks were confused about the regulatory position. For example, if they use cloud services for customer data and the provider gets breached, who is liable. As a result, they still resisted moving anything of importance to the cloud. Today, it is still confused for some. When can you use cloud, when can’t you use cloud?

To be honest, cloud has come a long way in ten years, from originally just being about Software-as-a-Service to anything as-a-service. Even Banking-as-a-Service! Banks have moved maybe 20 percent of their operation to private cloud, and these are typically hardware, infrastructure and non-customer related operations like payroll. Customer data is still housed within the bank, and often locked away in aging core systems that are inflexible and costly to maintain.

The problem with that is that it is the customer data that is the bank’s most valuable asset. If a bank can rationalise and leverage customer data for intelligent marketing and service, then that’s where the future competitive battleground will be. After all, most banks worry about the technology giants moving into financial services and what all the big tech firms do well is leverage data. Yet banks, with decades of history of customer data locked into legacy systems, are loathed to move this data as they might fall foul of regulators. This has to change.

What I find interesting here is that the majority of banks that are doing digital well, truly understand that they need data analytics on enterprise customer data stores and are doing this through private cloud services. They are placing customer data into these cloud systems on-premise in many instances, as they are aware that some regulatory requirements demand customer data is held within national borders. Nevertheless, they are placing customer data in the cloud.

I’ve even met some banks that are pushing the boundaries to move 80 percent of their operations to cloud. Why? Because it gives them total flexibility to move with demands of the customers and of the business.

I guess it is similar to my own personal use of cloud. To begin with, I was wary. Will the cloud provider look at my data? Or, even worse, lose my data? Today, I feel confident that I can place my data in the cloud and pick up the information I need, whenever I need it, regardless of location.

And that is part of the beauty of a cloud-based information business. The data – customer or employee – is available to whoever needs it, whenever they need it, wherever they need it.

In addition, it overcomes issues of staffers who take data home because it’s on their laptop. Surely, that’s more insecure than storing data in the cloud and secured by the bank?

The banks that understand this model are now creating interesting hybrid structures of private and public cloud services for their infrastructure, operations, software and data, that is driven by the regulatory model and central bank oversight. Those that get this have reduced their cost of operations significantly – sometimes reducing costs by as much as a half – whilst increasing their flexibility and agility. Long term, that may determine which banks will be winners and losers.

Bottom-line: is your bank ready to create a winning cloud-based systems architecture or are you sticking to doing everything in-house and becoming a loser?

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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