Cloud technology has been at the forefront of the finance industry for a number of years now. More banks have been switching to this new technology as a way to increase efficiency and reduce costs. Evie Rusman speaks to industry experts including AWS about what they have to offer
In a push to get rid of complex, legacy software, banks such as HSBC and Goldman Sachs have been adopting cloud technology such as AWS. The hope from these financial institutions is to not only innovate but to create a service that is a lot smoother and seamless for its customers.
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Nowadays, it is all about modernising the IT structure of these groups in order to ensure customers are left feeling satisfied.
Speaking to EPI, Ian Massingham, Director of Developer Technology & Evangelism at AWS, explains how cloud tech is essential to ensure the finance sector remains relevant.
He says: “Finance traditionally has been a technology heavy sector. It relies a lot on IT and software in order to not only operate to scale but to deliver innovations to their customers. AWS really enhances the way in which financial service providers and other businesses in the finance sector can operate.
“There are some distinctive characteristics of the cloud that are totally different to traditional IT. It’s more accessible in terms of the speed when it comes to access of resources and it provides an unparalleled innovation to customers. Financial organisations can really benefit from those characteristics.”
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By GlobalDataWhat do AWS offer different to its competitors?
According to AWS, its cloud platform offers more services than any of its competitors such as Microsoft Azure and Google. In addition, in 2017, the number of customers using AWS exceeded one million.
“First of all, we have the broadest range of services already,” says Massingham. “Currently we have over 165, with everything from basic raw computing services, like Amazon EC2, to virtual machines in the cloud, as well as sophisticated services for blockchain distributed Ledgers, smart contracts and immutable databases.
“We also have a unique infrastructure model, where we have 22 regions around the world. The infrastructure is divided into different availability zones, which are separate and independent of any domains.”
He explains that this allows customers to run applications in a specific location to meet regulatory and legislative requirements. Additionally, according to AWS, customers can use these zones to build applications that are durable and fault tolerant inside that single region.
“We are the only provider that offers this infrastructure model globally in every single region within which we upgrade,” Massingham adds. “No matter where in the world and in any of our 22 regions where customers use AWS, they can be secure in the knowledge that their data will stay in the location specified.”
Why are customers moving to the cloud?
Services such as AWS are very attractive to young digital challenger banks such as Monzo and Starling due to the fast environment in which products can be put on the market.
Paul Clark, Chief Technology Officer at Tandem Bank, tells EPI how the cloud has helped Tandem grow its customer base. Since officially launching in 2018, Tandem Bank has rapidly grown its customer base to around 750,000 users.
He says: “One of the biggest advantages of cloud is the ability to automate your infrastructure to make a scripted version repeatable so that all your environments are identical. Therefore, as you move software through the environments, there is a consistency of operation. In traditional data centres, you would have to hand configure everything.”
Clark explains how AWS offers the best cloud service, providing a number of extra tools that platforms such as Microsoft Azure and Google do not have.
“Through AWS, we are able to do around 2,500 production releases a year,” he adds. “Every two weeks we have a new version of our app on the market. We could do it more regularly but this is a good timeframe for our customers. With this platform we are able to change things all the time.
“Over the coming months, you will see an increased number of products and services, and a maturing of existing ones as well. Some we might switch off because it is not working as we intended and some we might remodel because the idea is good but the execution is bad.”
In addition, with older, more traditional software there is an increase in the difficulty of finding a cause of problem when something goes wrong.
Clark says: “If you can release software all the time, you can effectively do lots and lots of little experiments. So you can find out much more quickly what your customers do and don’t like and make the things that they do like better. You can also get rid of them.
“This is better than the way it is done traditionally, where you have big heavyweight change processes that take months and months to implement. Here, what companies are actually doing is storing up risk. If you have got six months’ worth of development that you want to release, and something goes wrong, institutions could face major issues.”
Similarly, Massignham explains how enabling this kind of new content creation is the reason behind companies switching.
He says: “I think that ability to innovate and the ability to deliver new ideas more quickly, with lower cost and lower risk is probably the core of it. I think there’s some element of looking at fintechs and new start-ups that are entering the industry. They are obviously able to accelerate out of the blocks very quickly.”
Massignham uses Monzo as an example highlighting that they were able to reach one million customers in the UK very quickly. He explains how Monzo has been able to produce compelling products through the agility and speed of cloud services.
“There’s also a drive to be efficient in the way in which resources are secured. It might be less of an issue in finance, because they have ready access to the capital that’s required to invest in things like data centres or high cost, technology infrastructure,” he adds.
“But they still want to be efficient in the way in which the funders are, and of course, one of the things that you get from using the cloud is a much more nimble planning landscape for your financial investments.”
Big opportunities
Recently, financial institutions have been plagued with outages and data breaches. Massignham highlights the power of cloud technology in providing big opportunities for these groups to excel and become more secure.
He says: “There are big opportunities in machine learning and artificial intelligence. For finance, I’ve already got customers that are using machine learning to do a whole range of different things, things as simple as identity verification, with facial recognition, right the way through to things as complex as enhanced credit risk models.
“Financial services providers want to protect customers, but not add friction to the customer services experience. And if you can develop better, more effective machine learning based model for scoring things like credit risk so that your credit card transactions will flow through the system in a smoother, frictionless way, then that’s beneficial for the banks in this production.
“AI and machine learning is something that we’ve done a lot of at Amazon over the years. Over the last three years, we’ve been working really hard to make a lot of these capabilities available to our customers. This extends from low level infrastructure resources, like optimise computing for design right the way through to high-level simple-to-use abstracted services like Amazon rekognition.”
A change in comfort levels
As cloud technology has developed over the past decade, companies have been sceptical about making the switch. For instance, last year financial institutions were estimated to have spent around $261bn on technology, however, 67% of this money went to maintaining older systems.
“When I joined AWS six years ago, there were only a small number of companies that were committed to moving to the cloud,” Massignham adds. “Capital One was probably one of the first to commit on a significant scale and move to AWS.
“We’ve seen a really big leap forward by financial services and companies of all types to make more use of the cloud. I think a lot of that comes from normalisation. The early adopters are interesting organisations that are prepared to take a leap of faith in the case of finances.
“Once you’ve got a few early adopters that are using a particular technology that are in the same sector or vertical market, then, of course, you get more rapid acceptance. For example, you look to your friends for advice. Banking CEOs or CTOs are not much different.”
