This week I’ve been traveling, so the bicycle has been stored in the garage and as I write this I find myself on a plane. Therefore, what better subject for this week's discussion than clouds- or more specifically cloud computing, or On Demand, or SaaS- whatever your preferred term is.

There has been much discussion about cloud taking off for some time in the banking industry, but many have yet to embrace it. However, I’m not sure this is really true. I’ve been in this industry for over 25 years and one of my first experiences was with a dial-up multi-banking statement reporting service. Was this this cloud? The fact is that there have always been services to connect to, whether via the old-school modem or the internet. But for some reason, we only seem to talk about the cloud in the future tense.

So let's examine the current cloud solutions. On one hand, we see the all-out handover of a bank’s operations to a service company. But that's not really cloud; that's simply getting someone else to run something on your behalf. Sure, the operations are someone else’s problem, but the recommendations and experience still fall to you, and it's still your (most likely old) application.  On the other hand, we see full on-demand service centres and this, for me, is true cloud, whereby vendors offer fully running applications and the maintenance services around it, to which buyers can subscribe. 

Running in the cloud means you can have as much, or as little processing, as you require at any time of the day, saving money, and effort, and it should be faster to market. But it goes beyond that. The true value is that of a shared experience. It enables a bank to benefit from the experiences and input of their peers. Not so that it looks the same to the customer of course (we all want to differentiate), but the general goal is a common one.  The knowledge of the cloud operator is likely to be world class to the point where they should be the global experts on how to run and get the best out of this particular service. 

Transaction Banking is beginning to see more cloud services. Several applications, covering a range of different payment processing—Internet banking, fraud protection and SWIFT connectivity—are all available in these On Demand centres.  Every week, new initiatives are being introduced so if a bank truly wants a full or partial cloud-based solution, there are certainly companies that can offer services.

However, one of the reasons that banks have kept away from these centres is for fear of lack of control if something goes wrong. Through no apparent fault of your own, it will still be your reputation and brand that suffer when your customer can no longer do business with you. And in today's world, you're likely to learn of an issue via Facebook and Twitter before the support centre calls you.

Thankfully, failing cloud services are becoming a thing of the past. Sure, there are still well-publicised failures of some offerings.  But with the proper security, audit controls, error resolution and systems management, the cloud can be a trusted environment. There is true advantage to be had from sharing a world class operation, and banks can benefit from having a piece of that solution and experience for a fraction of their normal investment. 

Cloud is no fad—it is the past, present and future—and banks need to think about how they can take advantage of it.