There is this telling anecdote of how an e-commerce giant discovered that most of the banks in a particular market did not have the infrastructure to handle the estimated transaction volumes of a one-day only ‘Big Billion’ sale. Now, it is hard to think of a provisioning strategy that could solve that problem without leveraging the potential of the cloud.
For banks, the key question when it comes to cloud adoption is not ‘why’, but ‘how’. Based on our experience with our financial services partners, we believe that banks should follow a simple three-step strategy to transition smoothly into a cloud-first model. The first step is to shift non-critical environments, like development and testing, to the cloud. This should be followed by a focus on leveraging cloud techniques to optimize infrastructure investments and performance. The third step is to move the production environment to the cloud and take a cloud-first approach to all future technology-sourcing decisions.
In our view, banks betting on digital leadership should at least have progressed to the second phase of this three-step program. There are already some early examples of cloud-first banking. Robeco Direct N.V., a Dutch bank, has moved its retail banking platform to the cloud, following the country’s banking regulator authorizing the use of Amazon Web Services. Bankinter, a leading Spanish bank, is using the cloud to run its credit risks simulation. In fact, it has been able to do these simulations in just 20 minutes, compared to the 23 hours it took earlier.
Banks need to view the cloud as an enabler of new business model rather than a technology, and evaluate its utility based on the value it delivers to all stakeholders. Granted, there are still some security concerns and regulatory grey areas that need to be addressed. But a coherent cloud strategy will be a critical component of any successful digital banking strategy.