Good Investment: Why Banks Need to Open up to the Cloud

Why do banks need to move to the cloud? The answer is simple: they are lagging behind. Looking at cloud adoptions, banks rank in the lower midfield according to a study by KPMG and Bitkom. While the cloud is firmly established in 70 to 90 percent of the German energy, transport, logistics, automotive and mechanical engineering companies, only 59 percent of banks are using the benefits of a cloud environment.

From ‘no-go’ to ‘cannot do without’

Nevertheless, there is a paradigm shift from ‘an absolute no-go’, to ‘obviously cannot do without it’. After all, more and more banks deliberately deploy or plan to deploy cloud-based solutions. This may be a response to the Fintech start-ups challenging traditional banking with innovative apps and cloud services. However, it is just as true that mobile banking, as it has been offered by all major banking institutions for years, has become simply unthinkable without cloud computing. In addition, the increasing price sensitivity of the customers and their growing readiness to change their bank, and the persistently low interest rates intensify competition and cost pressures.

The perfect match: cloud and DevOps

The days are over when a clear, “no”, to the cloud was considered a general industry rule in banking. Their application scenarios with infrastructure, platform, software and analytics-as-a-service, are much too diverse for a simple “no”. On top of that comes the increasing adoption of DevOps in the cloud, which has in part revolutionized software development. Since banks have always – not just in the era of GDPR – had the obligation to meet very high data security requirements, their tendency to operate critical data and applications either on premises or in a hosted private cloud environment is well founded. On the other hand, public clouds – with their flexible provision of IT resources – are ideally suited to support fast and efficient development processes.

Always on: dynamics and cost advantages

Whenever there is a certain dynamic – be it in the DevOps area or by switching applications on and off – the cloud can certainly offer significant cost advantages. Nevertheless, it is also important to clear up an important prejudice here. So-called "always-on" applications, which operate around the clock, do not automatically generate significant cost advantages when deployed as public cloud solutions as opposed to well-organized operations in on–premises or private cloud environments. There is no rational reason for that.

Beginning of a new era: multi-clouds

But in 2018, the cloud world can no longer be divided into private, public or hybrid alone. The trend is taking a big step beyond this, towards multi-cloud environments. Here, cloud solutions from various providers connect not only with each other, but also with on-premises and private cloud solutions. It can, for example, be beneficial for banks to deploy multiple cloud environments running separate systems for different applications, self-service terminals, or services.

We therefore advise our customers to rely on software applications that can be operated both in cloud environments of different providers and as on-premises solutions in their own data center, on their own or on virtualized hardware. This gives them the greatest possible flexibility and financial security, and it avoids cloud vendor lock-in.

From BaFin to GDPR: adaption of cloud providers to complex conditions

Hardly any other industry needs to meet as many national and international regulatory requirements as the banking sector. Physical resources must be clearly identified always, personal data must not leave the European Union, and the German financial supervisory authority BaFin must be able to carry out audits at any time. Against this background, to future-proof an IT infrastructure that has grown over decades, is quite a difficult and complex task. But it is also true that leading cloud providers have adapted their offering precisely to these complex conditions and requirements.

A critical moment for IT managers

In addition to building an intelligent cloud infrastructure, this is a critical moment for IT managers to think about future-oriented technologies such as big data analytics, business intelligence (BI), deep learning and artificial intelligence – because many business processes such as CRM, risk management and fraud analysis can no longer operate effectively without analytics and BI. These technologies can make a significant contribution to identifying unknown markets, product ideas, customer segments and competitive advantages, and to optimizing processes and IT security – as current applications at Danske Bank or Standard Chartered Bank illustrate.

The Teradata Everywhere approach gives banks the freedom to use Teradata Analytics software for a wide range of deployments – enabling them to analyze their data anywhere, anytime.

Banks have to become “smart”

To avoid other industries outrunning the established banks, or that Fintech companies become a market-dominating force by means of data-based customer experience, classic credit institutions must open up to new technologies. This is the only way for them to successfully master the digital transformation and become a “smart bank” of the future that knows how to leverage large amounts of data effectively.

Check out our website and learn more about why we provide the fastest path to secure, scalable analytics in the Cloud, so you can benefit from operational agility and de-risk buying decisions by allowing you to start small and scale fast, deploy anywhere and move anytime.