While legacy core banking systems once provided the backbone on which the world’s financial infrastructure is built , the processing demands of digitalization and heightened customer expectations require more agility, so banks are turning to cloud-native technologies to provide next-generation customer experience, whilst enjoying lower cost, easy maintenance, flexibility, speed of deployment and security.
At 33%, Amazon Web Services (AWS) has the largest share of the cloud market and is, according to a 2017 report by the World Economic Forum, forming the backbone of the financial services ecosystem. From capital markets and insurance organizations to global investment banks, payments, retail, corporate banks, fintech and startups, AWS helps customers to unlock a wide variety of benefits enabling them to scale business models and transform product offerings.
Rowan Taylor, head of Financial Services Industry Business Development, EMEA, Amazon Web Services says financial services institutions are using AWS to optimize all aspects of their business—from customer-service delivery models to risk management—in order to build a foundation for long-term growth, and product differentiation.
“AWS does this by helping customers to modernize and transform their organizations through access to technologies like compute, storage, and databases, through to machine learning (ML) and artificial intelligence (AI), application programme interfaces (APIs), microservices, data lakes, Internet of Things (IoT), and fully-managed data management and analytics services like Amazon FinSpace—purpose-built for the financial services industry to facilitate the storage, cataloguing, and preparation of financial industry data at scale,” states Taylor. “This makes it faster, easier, and more cost effective for customers to move their applications to the cloud, to accelerate innovation, and build nearly anything imaginable to transform their businesses.”
Enhancing Cloud Security
Concerns over security, data residency, and privacy left financial institutions behind other sectors in moving to the cloud. A survey of 100 global banks by Accenture in 2021 found that just 8% of workloads run in the cloud. This figure is expected to double within two years, however, as banks weigh speed of execution against security and resiliency.
To assuage such fears, cloud service providers (CSPs) have invested heavily in best-in-class security, privacy, and compliance to meet the very strict levels required by financial institutions. “AWS is architected to be the most flexible and secure cloud computing environment available today,” Taylor says. “Our core infrastructure is built to satisfy the security requirements for the military, global banks, and other high-sensitivity organizations.”
To fine tune its financial services offering, AWS has poached talent from banks. Prestigious banking hires include former JPMorgan executive director in trade surveillance John Kain, now leading AWS Worldwide Business & Market Development for Banking and Capital Markets. A bevy of hires from Goldman Sachs include machine-learning wizard Roger Li Zheng, Jeff Savio, softward engineer Ishan Guru; Ranjeet Dayama, a former vice president of data engineering at Marcus [Goldman's digital consumer bank] and principal solutions architect John Butler.
AWS is not alone in viewing banks as fertile recruitment grounds: Microsoft VP of Worldwide Financial Services Bill Borden joined from Bank of America Merrill Lynch, while Howard Boville, senior VP of IBM Hybrid Cloud, was Bank of America’s former CTO.
Last November, AWS and Goldman Sachs announced the launch of the Goldman Sachs Financial Cloud for Data. “This new suite of cloud-based data and analytics solutions for financial institutions redefines how customers can discover, organize, and analyze data in the cloud, allowing them to gain rapid insights and drive more informed investment decisions,” Taylor says, explaining that the collaboration with Goldman Sachs reduces the need for investment firms to develop and maintain foundational data-integration technology and lowers the barriers to entry for accessing advanced quantitative analytics across global markets. “This means Goldman Sachs institutional clients will be able to accelerate time to market for financial applications, optimize their resources to focus on portfolio returns, and innovate faster.”
To help financial institutions and other data-heavy clients achieve performance gains and cost savings AWS launched Graviton3 processors in December 2021. These provide up to 25% better compute performance compared to the previous generation and use 60% less power for the same performance than comparable Amazon Elastic Compute Cloud (Amazon EC2) instances, the company says. “This means it is more energy and cost efficient to operate cloud services, which can help customers to be more sustainable,” explains Taylor.
Looking ahead, Taylor believes open banking has the potential to transform the competitive landscape and consumer experience of the banking industry by providing third-party financial services providers with open access to consumer banking, transaction, and other financial data from banks and non-bank financial institutions using APIs. “Open banking is slowly becoming a major source of innovation allowing financial services customers to build unified APIs across multiple microservices that can interact with third parties faster.”
Similarly, AWS expects open banking to have an impact on corporate banking because it integrates transactional services into the Enterprise Resource Planning (ERP) systems. “Treasurers can make executing transactions out of the ERP system easier, reducing the complexity of linking and exchanging data between siloed systems,” Taylor says.
He predicts more financial organizations to leverage their data and use ML and AI to optimize nearly every aspect of the financial value chain, from front-of-house customer service to back-of-house processes like risk and fraud mitigation.
For example, NuData Security, a Mastercard company, leverages billions of anonymous data points and ML to identify and block account takeover attacks. “NuData helps customers fight fraud and protect consumers online, and uses the ML services to improve detection of fraudulent attacks, and AWS servers to provide real-time device intelligence.”
In March 2022 NatWest Group said it was seeking to leverage machine learning to become a data-driven bank. “By working with AWS and applying our ML and data analytics services, NatWest Group will have the ability to derive new insights,” Taylor says.
For financial institutions of all sizes, the cloud has gone way beyond commodity IT and cost savings. It now provides transformational tools to modernize quickly and stay abreast of the innovations brought by challenger banks.
The article "Beyond The Cloud" was written by Gilly Wright.