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Cloud: the catalyst of transformation

Is Cloud computing one of the most transformative technologies of the current times? It is hard to tell as there are other equally exponential technologies such as AI, Quantum, Blockchain and 5G, but I believe Cloud is one of the biggest catalyst of transformation today. This is because it has the power to drive speed, intelligent automation and new revenue streams in business like no other technology.

The proof of the clout of Cloud is in the astronomical growth in the global market for Cloud computing. The global Cloud computing market has grown 5-fold in the last 7 years to near $500bn p.a. in 2022. Cloud now accounts for more than 10% of the total global IT spend and is expected to grow rapidly in the coming years.

Let us examine each of the 3 drivers of transformation.

1. Speed:

Last year, my team wanted to launch a web-based portal to improve fitness and drive engagement across our colleagues and clients globally. It took us 8 weeks from concept to the launch of the portal... all on Cloud. Hitherto, such an initiative would have taken months to just provision the infrastructure required to host the portal.

Cloud is a big enabler in improving speed of technology programs. Often the slowest part of any technology implementation is the infrastructure setup. Cloud makes Infrastructure available 'as a code' to the developers. So, developers do not need to wait for a long time to provision the infrastructure. They can write code to spin up new 'virtual' machines from their private or public Cloud and get started in minutes.

Outside of infrastructure provisioning, software development is much faster on Cloud. Cloud platforms come with better instrumentation and automated DevOps pipeline (equivalent of automated assembly lines in manufacturing), which makes software development less tedious and more efficient.

2. Intelligent Automation:

A global bank had a large team of people monitoring trader conversations for any impropriety. Even after spending a huge amount of time and money, they could only monitor a small sample of conversations and had a large risk exposure. We developed an automated trader surveillance platform that converted all trader conversations from speech to text and then analysed the text to flag suspect conversations for review by experts. This solution reduced the banks spend significantly while improving the coverage and thus reducing the risk exposure of the bank. All of this was possible by using AI on Cloud. 

Intelligent automation such as the above, can transform business processes. The AI required to drive Intelligent Automation, is now mainly available on cloud, which helps businesses avoid the prohibitive cost and complexity of developing such AI models in the data center.

The value of this capability really came to the fore during the COVID 19 pandemic. In April 2020, as the world went into a lockdown, we launched a virtual agent for TSB Bank (a high street bank in UK) in 7 days. This speed was possible because the AI required for the virtual agent (Watson Assistant in this case) was available via Cloud, at a fraction of what this capability would have cost to put in place in a data centre just 5-6 years earlier. The AI was also more mature than it would’ve been at that time, having been developed and trained on a huge amount of data available on cloud over the years.

There are many examples of Intelligent Automation underpinned by AI on Cloud that is changing financial services. Banks are using machine learning models on Cloud to better detect payment fraud. Mortgage lenders are using Cloud based AI solutions to automatically read bank statements, salary slips and other documents to make affordability decisions in minutes to reduce time to offer for new home loans. As AI has found its home on Cloud, the possibilities are immense.

3. New Revenues:

AWS Marketplace has 1,354 financial services related data services. Services range from providing market data (e.g. prices and companies research), credit data to enable faster decisioning, etc. While many of the services here are basic, the number of banking and insurance related services and their consumption on Cloud is growing fast.

Banking-as-a-Service on Cloud is an emerging source of revenue in financial services. IBM has partnered with Starling Bank, a Cloud based challenger bank in UK, to offer Banking-as-a-Service to its clients. Starling Bank already provides Cloud based SME banking services to SumUp, who provide payment solutions to merchants. By using Starling's SME Banking Services on Cloud, SumUp can now ensure their UK merchants receive payments on the next business day instead of waiting for 2-3 days.

According to Mckinsey, 5% of APIs in banking are public, i.e. used by external developers for open banking purposes, including revenue generation and participation in ecosystems. They expect this number to triple by 2025 leading to new sources of revenue for banks. 


Before we close, it is important to address the myth that Cloud is cheaper than data center based hosting. In my experience, simple lift and shift of applications from data centers to Public Cloud on its own is not as effective. However, when combined with a wider transformation that drives speed, intelligent automation or new revenues, the case for Cloud is clear as day.



The road to Transformation

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Prashant Jajodia

Prashant Jajodia

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This post is from a series of posts in the group:

Banking Strategy, Digital and Transformation

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