01 September 2014

Phil Boland

Phil Boland - The B2 Group

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Cloud for Banks and Corporates, or just more fog?

08 July 2014  |  1326 views  |  1

Cloud computing services are being cited as the panacea for rising internal computer costs, offering scalable IT infrastructure to large and small companies alike. Cloud based services, we are told, can manage all of our client on-boarding and channel integration needs, from running an ERP system to automatically integrating transaction and statement processing to and from the transaction bank, whilst in well documented cases halve costs and increase processing speed by orders of magnitude. Wow that’s amazing!

Here’s the, but … whilst the cloud can certainly deliver for some business sectors, closer scrutiny shows a number of pitfalls to be considered in relation to channel banking.

What is “the Cloud”; let’s make it clear – now there’s a notion!

Put very simply, “the cloud” is really an umbrella term used to refer to Internet or other third-party based development and services with attributes defining cloud data, applications services and infrastructure that include:

  • Remotely hosted: Services or data are hosted on remote infrastructure.
  • Ubiquitous: Services or data are available from any geographical location.
  • Commodified: Pay as you go/pay only as you use, with a computing model similar to that of traditional utilities, like gas and electricity
  • Elastic: Can scale up and down as usage demands
  • Multi-Tenant: The same infrastructure is shared by multiple entities (corporates and banks and their different branches and users in our case)
  • Human Resource Efficient: In-house IT can be radically scaled down, as most infrastructure is managed in the cloud. 

Cloud computing therefore covers both data storage and outsourced running of business applications (so called ‘Software as a Service’) in any manner as long as it is off site. Similarly, cloud computing can refer to a broad set of hosting scenarios, anything from simply hosting one’s business application (e.g. ERP system) with a third party on a single unshared server to deploying across a geographically distributed service accessed by many other enterprises and users with your data or application sharing servers with others and residing anywhere in the world.

The level of service from the cloud provider may also vary, from full outsourcing where the provider looks after every aspect of the application’s running to purely providing a hosting infrastructure which the user access remotely.

“Should I use the cloud?”

Rather, the question to ask is...

“What sort of cloud service should I use for which of my business processes supported by which particular software components and in which particular territories and markets?”

Surely there are risks?

The banking sector has been reluctant to fully embrace cloud services for very straightforward issues, including:

  • Security & Privacy: who can access your data, interfere with your incoming and outgoing messages
  • Service Levels: guaranteed up-time and processing speed
  • Software Maintenance: quality of software releases
  • Regulatory Compliance: staying in-line with local jurisdiction requirements such as where data resides
  • Loss of internal know-how: increase in the amount of control the cloud provider exercises in the running of mission critical operations
  • Legacy migration: cost of moving existing on-site run applications into the cloud.

So whilst the attributes of the cloud mentioned above do bring clear benefits in some sectors, such as non-sensitive retail applications that require large scale processing power or data storage processing (e.g. on-line video on demand), given the perceived risks, banks and corporates continue to ask questions about the applicability of the cloud in the finance sector.

These questions are particularly relevant to corporate channel banking integration, where the high value/volume external transaction environment is especially susceptible to computer fraud.

Cloud computing is certainly here to stay and on the increase, but the level of uptake and benefits gained by banks and corporates for critical functions such as channel banking remains to be seen, and will depend on informed choices to overcome very sensible misgivings regarding what can be viewed as both a leap forward in cost reduction and operational efficiency and a leap backwards, if left uncontrolled, in security and service levels.

Next time … the wrong sort of Cloud - you just knew it wasn’t going to be quite so easy, didn’t you?

 

 

 

TagsPaymentsTransaction banking

Comments: (1)

Vishwanath Thanalapatti - Risk Management Professional - Toronto, Canada | 08 July, 2014, 17:03

For bank's to move onto to cloud it is important to have an information architecture landscape. In this matrix, information assets must be mapped to business criticality with risk categorisation. The risk can be regulatory, legal, business etc. This is very foundational for a bank to move from 'on premise' model to 'cloud' model.   Morover bank's have several environemnts such as dev, prod etc. So the call to move is strategic. In my analysis of cloud providers, much of the constraints such as security, reg, SLA's are more hygiene today. This is where we can say cloud has matured.

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Phil Boland

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Chief Executive Officer

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The B2 Group

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Vishwanath Thanalapatti