Gary Wright, head of research at Finextra, took to the stage to lead a day of sessions focused on the use of cloud in the financial services industry at King’s Place in London on 2nd March 2023.

The day was split into three builds: Strategise, Migrate and Optimise and covered how many banks are still at the earliest stages of cloud adoption, and few have created fully integrated, omnichannel customer experiences. Fewer still have migrated their core business-critical workloads in payments, clearing and settlement to the cloud.

Build 1: Strategise – Plan and select, connect and consume, budget and secure.

Build 2: Migrate – Choose and validate, adapt and communicate, support and manage.

Build 3: Optimise – Identify and consolidate, tailor and innovate, equip and improve.

A week from the event, here’s an overview of the conference, which saw over 200 technology decision makers gather to help bridge the cloud migration gap and hear a range of speakers offer actionable solutions to speed up their journey.

What does a successful cloud strategy, migration and optimisation mean?

Kicking off Finextra’s inaugural Financial Cloud Summit, former Dragons’ Den dragon Piers Linney, entrepreneur and investor, founder and CEO of Moblox, set the scene for the day, focusing on cloud strategy, migration and optimisation.

Linney spoke to an audience and explored what financial institutions need to do to succeed, how performance can be measured and how banks can be a part of the ecosystem. After 10 years in the cloud industry, he spoke about innovation curves and stated that innovation – mostly – increases at a gradual pace, and then accelerates as the technology matures.

Linney explained that he has spent a lot of his time and experience in banking and finance fighting what he refers to as “FUD: fear, uncertainty, and doubt. Is cloud secure? What does it cost? Can you migrate to cloud? Do we have to wait for cloud to save the world before we choose the cloud?”

He went on to explain that change is no longer linear and is now exponential. The world is now changing at a different pace and the customer is now dictating how banks decide to add value with their tech stack, which should be an enabler and technology decisions should not direct what financial institutions can and can’t do.

It is evident that cloud provides scalability and allows infrastructure to grow with banks. If financial institutions attempted to experiment with old models, this would create more technical debt and could even result in an individual or a team losing their job. With the cloud, as Linney explained, the industry can be different.

Successful cloud usage will separate the winners from the losers. By considering competition and establishing a holistic strategy, a migration plan or a rebuilding of infrastructure will ensure competitive advantage. However, “there is no end date on a software development project.”]

Do you need cloud?

Discussing the first Build: Strategise, Avinash Kumar, product director, Temenos Banking Cloud, referenced a recent study where 72% of IT bank executives revealed that the cloud supports their organisation to achieve their business priorities.

Providing an inside-out and outside-in perspective, Kumar said that every organisation in the world wants to increase the top line and optimise the bottom line. “What puts banks in a different position is that they are trying to achieve this while they are at the doorstep of modernisation.” He added that banks have recently seen a flat trend on return of assets, what he considers a “flat decade”.

Kumar reiterated that the cloud opens the door to stay differentiated, go to market with unique propositions and fight commoditisation. For the bottom line, the cloud also helps to operate with predictable cost and reduce total cost of ownership, which includes operating cost.

Turning to the topic of banking as a service and embedded finance, Kumar explored how the real challenge for incumbent and traditional banks is that they own the entire banking value chain, which has historically been a closed system. However, the reality is that adults spend six to eight hours online and they are no longer interacting with their bank.

“Cloud and SaaS sits at the heart of any new banking model,” Kumar said, and went on to explain that banks must increase their top line and tap into new business propositions. Further, the only way that they can do this is by adopting open technology, which supports their intention of being secure, scalable, and resilient.

As a final comment, Kumar concluded with the statement that “every bank will have their own path and banks need to adopt a progressive banking model.” With cloud, banks will adopt a platform that is built on modular capabilities, can go to market faster than ever and pave the way to progressive modernisation.

Orlando Fernández, senior technical specialist, recovery, resolution & resilience, Prudential Policy Directorate, Bank of England, then explored the best cloud migration model: rehosting, replatforming, repurchasing, refactoring, retiring, or retaining? This session was under Chatham House Rule.

How to do more for less with hybrid cloud strategies

For the final keynote of the day, on hybrid cloud strategies and doing more for less, Ben Scowen, VP of cloud and core enterprise, Kyndryl UK & Ireland, covered the tangible things you can do to optimise IT, making it a value engine for the business, rather than a cost that inhibits growth.

Scowen brought clarity to the event and stated that transformation is “getting more complex by the minute and moving at a hell of a pace. We are creating technical debt, using software and hardware that is now out of date, and the in-fashion technology that was in is now not in.” Therefore, with the problem being extremely large, we must do more for less.

Painting a canvas on which to have this discussion, Scowen takes a similar view to Kumar and explained that the core objectives for most businesses is to grow revenue, optimise cost, manage risk and promote sustainability. But how do we affect change? The answer, as Scowen mentioned, is transformation, but “it is an agile process.”

While business transformation will allow banks to pivot into new markets and reimagine your business in a digital age, hiring engineers for seven teams in parallel will create more technical debt, as the institution will not be able to avoid similar tasks being completed by each team. “IT transformation is your get out of jail free card, and will allow you to scale up your digital business and industralise that process.”

Scowen finished with 10 points on how to achieve success with cloud optimisation:

1. Own and master your transformation,
2. Unify your hybrid cloud by bringing hyperscaler technology into your data centre,
3. Take a conscious multi-cloud approach,
4. Take a platform approach to scale your digital productivity,
5. Embrace low-code and SaaS,
6. Be driven by data, insights, and observability,
7. Embrace modern security practices,
8. Create a strategic approach to talent building,
9. Automate, codify, software engineer wherever possible,
10. Establish a modern culture and operating model.

How to determine the logic behind digital transformation

To successfully engage in digital transformation in the transition to the cloud, financial firms are looking for creative methods to approach their cloud strategy. In doing so, companies are dealing with issues of cost, security, and scalability. The first stage of the conference explores how companies are making strategic on visibility, data ownership, cloud providers, and more.

Discussing new digital transformation strategies emerging in the cloud in the first Strategise panel on digital transformation and the logic behind change was Siki Giunta, executive vice president of CloudSMART Offerings Strategy at HCLTech and Sonia Greenberg, associate director of cloud and managed services at FactSet, moderated by Finextra senior reporter Paige McNamee.

Greenberg started off the panel by remarking on the issues in coping with the demands of consumers when it comes to data and managing alternative data within alternative banking schemes. She continued that that cost pressures due to profit margins are prevalent and reducing costs whilst dealing with monolithic technologies is a major struggle that financial organisations are facing.

Giunta stated that digital transformation and cloud migration are two sides of the same coin; you cannot have one without the other. She continues that there is no “end state” to transformation, it is an ongoing process of change.

She stated that cloud is an ongoing, morphing process: “The first invoice that was released by AWS to Amazon was April 28, 2004. So, we have in a long run this cloud market that morphs all the time. I think the most important thing constantly in this is that relationship with the business and their value chain, and how to adopt cloud services and car technology to advance it.”

Sustainability needs to be taken into consideration when financial corporations digitally modernise, Giunta emphatically stated: “We are actually starting for the first time to collect data to really clear understanding of our digital footprint, our cloud implementations. Cloud providers deliver a lot more focus and a lot more transparency. I think internally in financial services are considering the possibilities, adding to the industry like utility, or healthcare, they are all starting the journey to understand their footprint. When you start collecting the data, you see straight away, should I do this left unchecked? Or should I rewrite processes in a more sustainable, contemporary, and easy to maintain way?”

Greenberg agreed with Giunta on the cloud providing new resources in regard to ESG and how new tools are available to build products the right away. “As we keep saying, it's about what problems we are trying to solve. It's really a breeding ground for innovation for both large institutions and small institutions to think to themselves, what's the real value proposition of what we are trying to provide? How do we do that better?”

Giunta stated that there needs to be a “North Star” when applying agile techniques in digital transformation, go in with pathfinders, look for common patterns in a set of applications and build the foundation on which cloud services can operate to reap the benefits.

Greenberg remarked that hybrid cloud is the future and there are new technologies that will focus on data meshing and solve emerging problems in the transition to the cloud.

She commented: “Honestly, I don't think we are going to settle in a place where everything is fully in the cloud, and I don't think we are going to settle in a place where everything is on premise. There was a latest survey done in 2021 where they pulled in banking CEOs and over 70% said hybrid cloud is the future for them. I truly believe that is what will happen. So we have to build product especially when it comes to corporations that are going to do both use cases and data masters to help with that. There are more technologies coming that will solve those problems as well.”

When asked how financial institutions should approach people and the talent during the cloud transformation process, Giunta responded that cloud can be cruel, and that it is easier for the younger generation to use cloud-native solutions. She highlighted that building an organisation of change requires a change to the culture, to foster skills that requires the people to change and only then the organisation will follow.

Greenberg stated that learning has inspired change from the bottom up, that students are graduating with skills in Python and code, with degrees in product development, and that they are seeing the value of new technologies. Within the cloud, there is an experience divide in the social and technical aspects of creation. Giunta stated that within the industry, corporations should harvest experience and partner them with younger people who are able to adapt easily to utilising modern technologies and techniques.

How to ensure security with the cloud

The second panel on Strategise explores how companies are aligning their partners with their cloud strategy and prioritising security, led by experts Stewart Davies, global SaaS commercial director at Temenos and Andy Sturrock, CTO at Atom Bank, moderated by Finextra reporter Niamh Curran.

Curran asked how institutions are outsourcing data to the cloud and how trust can be balanced with cloud providers. In response, Davies stated that building trust happens over time and there is a myriad of factors that are taken into consideration.

He commented that how data is stored allows companies to process how the operating model works, once understood how regulatory obligations are met and data is secure, then they need to determine that it is all secure, and these foundational pillars create a groundwork for a healthy relationship.

Sturrock added that accountability is not outsourced, that it is a joint venture, therefore there needs to be a sturdy relationship built between the supplier and financial institutions early on to keep ahead of regulation and operate smoothly.

Davies stated that many early conversations with cloud providers focus on technology, but they should place more emphasis on how trust is delivered, and the service is provided.

Sturrock stated that there is no ‘either/or’ situation when it comes to security and technology: “If you pick technology because it provides great functionality, but it risks security that's not going to be work. If we lose our customers money, that's the end of the organisation. At the same time, it could be the most secure thing ever, but doesn't provide any features. That's not good for our customers either. So, it has to be both, and I think it's just utterly intrinsic, that they go together.”

Sturrock spoke to what banks are looking for in cloud providers, noting the GCP outage that occurred in 2022 was a scare, but explaining that it is important to ensure that there is an understanding of how the datacentres operate and how protective measures are being secured and to do background checks. Cloud has numerous benefits, but there is a level of worry involved in relying on an outside party that needs to be addressed.

Davies stated that handling international regulation they look for the “high watermark”; keeping an eye on what is changing in different nations when it comes to regulation when considering cross-border operations.

Sturrock stated that while it is risky placing trust into another organisation’s hands, there are measures in place to ensure that they are comfortable in the relationship. He states that at Atom, they possess encryption keys for everything that provides a level of comfort.

He expanded: “There was just a different way of doing security in the cloud. The old days used to have a big firewall on the outside and you will see that was going to keep everything all the intruders out. You have got to assume that that your network couldn't be breached and therefore you need to have certificates and authentication between all of your different micro services and all the different components and other aspects. But again, that's just kind of doing security in a modern way that we have evolved. I think if you do your API right, you can be as secure in the cloud as you can be.”

When asked about initiating a cultural change in financial organisations’ relationship with cloud providers, Davies stated that it is all about understanding what you do and what your partner is doing and to maintain communication to move towards coming up with solutions and creating customer value.

Sturrock observed that opting for the right cloud for the appropriate workload is a method that leverages the value of various cloud providers.

Davies closed with a statement: “We have done exercises with Tier 2, Tier 1 banks where we will just take it on their payments business, or we have taken on their offshore business. You go through the group reader, but it is almost a proof of value or proof of concept of them in terms of the way that they are building that into their strategy. Certainly, we are not expecting for all Tier 1s to be in their core SaaS provider in public cloud, but actually what we are seeing progressively is that journey of taking parts of the business and exploring and seeing what they can do, or entering new territory.”

How can the cloud help with agility and scalability?

Cloud migration is a major part of the financial industry today; traditional banks and emerging fintechs are in process of transitioning online to cloud services to become scalable, agile, and operate at a higher level.

As new cloud strategies emerge, the migration process becomes more complex in dealing with regulatory fragmentation, multiple options in cloud providers, and a unique array of approaches to the transition. The second stage of the cloud summit discusses how financial institutions are navigating their migration to the cloud.

Finextra’s head of content Madhvi Mavadiya moderates a fireside chat with senior operations and change management director at OakNorth, Neil Robinson, on OakNorth’s cloud migration journey with Amazon Web Services and their operations on the cloud.

OakNorth was the first bank in the UK to fully operate on the cloud as of May 2016. The bank’s partnership with AWS facilitated how they designed their cloud platform. Commenting on the most exciting benefit in operating on AWS, Robinson states: “The flexibility and ability to change is definitely high on the agenda. We have been able to launch products to market very quickly, by having bank in the cloud effectively. AWS also test the learning curve a lot earlier, allowing you to fail fast and move forward.”

AWS was the best choice for OakNorth due to their high security standards, Robinson details, which made it easy for the bank to operate across regions, leverage P2P testing, and maintain a high level of resilience throughout.

When asked about operational resilience as the responsibility of the bank, Robinson remarks that resilience measures are likely more complex with larger and older banks, whereas resilience is designed into OakNorth as a newer bank that was considering online risk when establishing their offerings.

Robinson mentions that the FCA is an innovative regulator and they are picking up on how the industry is changing, and it is essential to have the support of authorities to operate under their guidelines and frameworks to design products and services within the cloud infrastructure up to their expected standards.

When asked about security operations on cloud versus on premise, Robinson explains that cloud can invest more in security, which can then be outsourced where it can be applied at a higher standard. This leads into the build or buy debate – how do banks decide building in-house as opposed to buying from outside parties. Robinson believes that considering skillsets and ability to build offerings within the bank is a good way of considering whether to build products in-house or look elsewhere.

Commenting on how he defines a successful cloud migration in terms of agility, scalability, and disaster recovery, Robinson explains that customer outcomes and digital evidence are key indicators, and that rebuilding core banking infrastructure around operational resilience is significant.

How can the cloud help to keep pace with customer needs?

Paige McNamee, senior reporter at Finextra, returned to the stage for the second Migrate session of the day on customer experience and keeping pace with demand. Ange Johnson De Wet, cloud enabled business transformation - head of function, Lloyds Banking Group; Monica Sasso, EMEA FSI chief technologist, Red Hat; and Martin Bradbury, regional director, financial services industry, Dynatrace.

The session covered how financial institutions can strike the balance between migration processes taking servers temporarily offline, ensuring data does not become unavailable or at risk of breach and keep pace with loyalty or personalisation initiatives, at the same time.

Johnson De Wet believes that “everything starts with the customer.” All users and customers are humans and banks, when establishing new products and services, should understand that their expectations are shaped by the experiences they are having with their financial services providers, but also their experience with social media.

Further to this, she added that transparency is crucial to the customer. A good example would be the Chase website, where they have a list of every outage they’ve ever had. As Johnson De Wet explained, human attention span continues to shrink – it is currently averaging at eight seconds, one second less than a goldfish.

Connecting this with social media, customer experience and ultimately, the cloud, she furthered that while some agree that personalised adverts are useful, a staggering “53% think that they are creepy.”

In Sasso’s view, “we’re all customers of a bank, or many banks and a few fintechs and startups. We want it fast; we want transparency, and we want the journey to be the same.” Both software and hardware must support customers, but how can this be done, when everyone is different?

Bradbury added: “I don’t care about the tech being used by my bank, in the same way I don’t care what gets electricity and gas to my house. I just want the service to be there. We don’t tolerate unavailability and downtime anymore.”

McNamee posed a poll question to the audience and asked them: when was the last time your business reached out to existing or potential customers to ask them about the customer experience? 43% said they had in the last month.

Johnson De Wet stated that this task was “critical”; Sasso continued to say that banks must ensure to ask the extremes, the younger generations and older generations that we aren’t polling; Bradbury mentioned that banks should go “beyond being reactive and be proactive.”

At the end of the day, a treasurer within a bank has the same expectations as a retail customer. They want uptime, no outages, want to know the data is safe and want to know that improvements are being made. She went on to quip that before the session she had asked ChatGPT whether a big incumbent bank should move 100% of their infrastructure to the public cloud.

ChatGPT’s response was no, a big incumbent bank should be multi-cloud. Bradbury referenced the significant public cloud outage that occurred a few weeks ago. This had a substantial impact because all businesses rely on it and although multicloud can make a difference to resilience, there needs to be a trade off between that and managing complexity.

Sasso followed on from this to say that even though there is “no model example for a successful cloud migration,” a strategy for public and private cloud is important. Decisions must not be made in a haphazard way, because that is when things go wrong.

Johnson De Wet had a similar view and said that financial institutions must “do your homework.” To conduct a “good migration,” banks need to understand their current state and figure out whether the customer experience will change before, at, or after migration. She said that “before is much easier than hooking them into the go live date,” and when considering a long term plan, banks must think about multiple releases and think agile.

Bradbury agreed with Johnson De Wet and stated that “dependency is the biggest problem. A communication strategy is needed, as well as business change integration. There is no model.” Sasso, considering ChatGPT, called into AI into question and said that if no one cannot explain what the algorithm is doing and what the business value is, the product must be killed off.

Returning to the social media example, she went on to say that we all know the impact social media is having on us and financial institutions must avoid going into the same rabbit hole with personalisation. “We must drive better outcomes for our customers and get the product at the right time.”

As a concluding comment, Bradbury stated: “if you don’t understand your customers, don’t migrate because you have bigger problems to deal with.”

How can the cloud optimise banking as a service?

During the Financial Cloud Summit’s afternoon Optimise session, titled ‘BaaS: Entering new and niche markets,’ Finextra reporter Niamh Curran guided panellists through a technical discussion that explored how embedded finance and BaaS can help to transform the backbone of business operations.

After contextualising the topics with definitions of both BaaS and embedded finance, Curran encouraged the audience to participate in the discussion through Sli.do. Posing a submitted question to the panel, Curran asked Ainsley Ward, industry thought leader and business development lead, CGI, about the importance of avoiding lock-in with your ‘as-a-service’ provider.

“The reality is,” stated Ward, “to avoid lock-in you have to have infrastructure that enables you to work with many providers. You don’t want to have technology or those pieces that are very proprietary to the organisation.”

He says that having an API that allows an organisation to send the same data to one provider as you can to another is important. “We’ve been solving those same problems for a long time in the banking industry, and some banks prefer the security of having a variety of technology that does not keep, and others prefer to keep things open. Certainly, when it comes to finance, those layers that create the API environment are actually facilitators of getting into open finance. The technologies that prevent lock-in are also the ones that offer opportunity.”

Following Ward’s comments, Avinash Kumar, product director, Temenos Banking Cloud continued that BaaS is a platform API and a distribution plan. It’s a solution from a business perspective, platform, and technology perspective, but when talking APIs, the whole pattern of BaaS has been about experience and enterprise. This pattern enables BaaS players to integrate with a lot of vendors or partners cheaply. Even if you’re locked in, for transition from one vendor to another is quite cheap, because the experience layer is the only layer that would change thanks to standardisation.”

Kumar also picked up on the next question posed by Curran around the necessity of cloud in a BaaS context, to which he responded that while it would be possible to traverse the BaaS space without cloud, it would not be strategically successful. “The reason I say this is because BaaS is really hard. It’s volumes, it’s a consumption model, and all of this is enabled by cloud.”

Kumar’s view was echoed by each of the panellists, with Filipe Teixeira, chief information officer at Illimity Bank adding that it is a huge advantage when you want to enable innovation in your company. “When we look at cloud adoption and banking as a service over other models, the key point is around flexibility. Cloud based solutions are the entry to trying something many times. When we want to utilise important innovation models, there is often a fear of failure. Buying infrastructure requires a risk of failure, of damage to the company if it doesn’t work. If you have the right BaaS model, you can leverage on volumes, and if it doesn’t work, it doesn’t work.”

Turning to Billy Ferguson, chief technical officer at Thincats, Curran asked what exactly clients should be looking for in a technology partner to accelerate the BaaS adoption.

Ferguson noted that it isn’t all about acceleration. It’s more about moving in a manner that is reliable and can be continued safely. “These are financial products that are heavily regulated - it’s a difficult area. For me, finding a partner is about shared outcomes. When we are looking for a partner it’s for those who can share in that deliverable.”

This would include having parity around the relationship and working together, and then to understand what the business is trying to execute against.

“For me, it’s about trying to find partners to work with that can deliver the boundaries of the product - where the product works well and where it has its failings. None of these things work in isolation, you need to have a combination to work together,” Ferguson stated.

How can banks hire technical talent to support the exponential increase in cloud usage?

The second Optimise panel covered the IT talent. Moderator Madhvi Mavadiya was joined by Jason Maude, chief technology advocate, Starling Bank; Ben Scowen, VP of cloud and core enterprise, Kyndryl UK & Ireland; Charles Wood, chief architect, Mettle; and Mani Nagasundaram, senior vice president, head strategic initiatives and cloud ecosystems, financial services, HCLTech.

Discussing acquiring and maintaining technical talent, Scowen covered what he had explored in his keynote session earlier in the day, and added: “I think it never has been more difficult because once you’ve built and created that talent, and you’ve taught them a way of building something that’s effective.

“For example, I lost a couple of my team to Monzo, they were great software engineers. They had five years in the saddle of building cloud solutions at an incredible level, so they fitted really well into the culture that needed exactly that skill set. I think if you can get five years out of the people who work for you then you’re doing well.”

Nagasundaram agreed with Scowen but continued to say: “it has always been difficult to hire good technical talent, it’s not just now it has always been difficult.” Maude elaborated on this sentiment, “I’m not sure I would say it has never been harder, it’s different. Differently difficult. In the past, looking for tech talent would be more general, asking for a software engineer. Whereas nowadays, everything’s much more specialised.”

When asked about how IT talent acquisition challenges are influencing technology investment, Wood commented, “it does make it more challenging, but the question is do you go for a big team, with possibly simpler technology choices? Or do you have a smaller team of hyper-specialised people who are significantly more expensive?”

Maude added to this discussion: “I agree that you must have a sort of a simplified path. But one of the things that we have not done as Starling is we haven't decided to base our decisions on what changes our technical stack looks like on what people want to cope with we we've avoided doing that, because we know that we based on our back end services are written in boring old Java, because hiring Java engineers is something that we don't see running out anytime soon.”

The panel turned the topic of what the key organisational success factors to operating on the cloud would be. Wood commented, “lifting and shifting a piece of software that is not designed for a cloud environment is not likely to breed success. […] That requires a cultural shift.” He continued: “I think one of the biggest success factors is to be willing to ‘re-architect’ legacy architectures.”

Nagasundaram added to this, “it’s about learning, unlearning, and relearning. Unless you do that, you’re not going to be successful because the pace of change is so high today.”

Concluding the session and the first Financial Cloud Summit, Maude said that he does think that multidisciplinary teams are needed, “especially if you're dealing with somebody with software, you will have people who understand the technical side of it, but aren't experts on the business side of it, and vice versa. If you just have a thing where you segregate these two groups and make them write reports to each other, rather than talking to each other, you're going to get misunderstandings and bad results.”