CORE BANKING IN THE CLOUD Cloud first?
Alex Hamilton looks at the rise of core banking in the cloud and the challenges that FIs, new and old, must overcome to make the move to this brave new world
IBS Journal May 2017
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had its day atop the buzzword rollercoaster a few years back and is now the sort of “boring” tech that underpins a host of services at banks around the world. Placing a core banking system on the cloud is something entirely different, though. With challengers placing a lot of trust in outsourcing, how can the big players level the field?
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“Cloud is the default right now for pretty much any tech company because you’re building out and trying to create a system that is lean and agile as possible,” says Eugene Danilkis, CEO and Co-Founder of Mambu. “Every new developer and CTO is now saying ‘let’s go with cloud first”. It is reaching the point where banks are looking at the technology and seriously consider it as an option over legacy core banking platforms.
“Traditionally IT systems in banking have been built in support of driving process efficiency around each and every product,” says Raoul van Engelshoven, Vice President for Banking and Financial Markets in Europe at IBM. “As such, many IT systems have been built around delivering products in an efficient way and have not been structured or designed around serving the customer.”
Companies that have structured their IT systems around a product paradigm and less around a model of real- time client engagement, will need to adapt their IT in a changing world. Moving from an on-site deployment isn’t a simple process and is more akin to “open heart surgery without the anaesthesia”.
Despite this, banks “can’t afford not to” make the switch to the cloud, states David Mitchell, President at Nymbus
itcoin reigns supreme right now, but cloud
(pictured). “Basically, it is Infrastructure- as-a-Service at a much lower cost and it eliminates the 24/7 monitoring of an on-premise system. Migrating to the cloud ultimately allows banks to put the focus back towards serving
customers and doing it in a more cost-effective way.” While cloud “has become a mainstream technology for many banks”, argues van Engelshoven, we rarely see “a full-out large-scale migration”.
“Clearly [in the modern marketplace] all new developments will normally be on the cloud. Many banks adopt a cloud-first strategy for new developments, but for the legacy applications we see an ‘only move to cloud where it makes sense’ strategy. In many cases we see a move to re-modelling larger applications into smaller components, allowing to continuously configure and assemble applications or business processes rather than to build them.”
So, while the newer players may be tapping into the cloud as a default, how have the larger banks perceived the technology over the past few years? In October 2015, Capital One’s CIO, Rob Alexander revealed that the bank
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