Increasingly, financial institutions are migrating their core services to public and private cloud solutions.
While many industries have already made the switch from traditional on-premise to software-as-a-service and platform-as-a-service solutions, the financial sector has traditionally opted for a more nuanced, gradual migration to the cloud. Increasingly, however, financial institutions are now migrating their core services to public and private cloud solutions.
Financial institutions tend not to be the earliest adopters of new or emerging technology innovations. This approach can induce a sense of superiority from other sectors, who perceive the financial sector as slow to adopt new technologies. But, their caution is fuelled by the most important word in the industry’s lexicon ‘trust’. The days of ‘my word is my bond’ are long gone, but financial service providers are still trusted gatekeepers. They retain a duty of care over customers’ assets and data −reinforced by reputation and regulation − which demands a safety-first approach.
Many financial services rely on legacy systems, which have typically proven secure, reliable and robust, but also heavily customised. Over time, financial institutions have deployed significant financial and human resources to optimise and oversee the processes and technologies that underpin their client services. Both of these factors have, until now, made it difficult and potentially disruptive to migrate core services to the cloud.
In recent years, however, cloud technology has matured enough to provide the security and reliability needed to allow the industry to maintain their duty of care to customers. It is also widely recognised across the industry that cloud solutions bring clear business benefits by increasing agility, scalability and flexibility, and reducing overall cost of ownership.
Cloud ‘becoming the default’
The International Data Group (IDG) 2018 Cloud Computing Survey found that nine out of ten firms had moved at least some of their applications or infrastructure to the cloud, or were planning do so in the next 12 months. “Cloud computing is quickly becoming the default at companies of all sizes,” the report said. The survey predicted that the average IT environment would switch from less than half cloud-based (48%) to more than two-thirds (69%) in the next 18 months.
The IDG also notes the popularity of a range of service models, with software as a service (SaaS) the most common (used by 89%), followed by infrastructure (IaaS) and platform offerings (PaaS). While SaaS solutions can mean the customer does not need to host, operate and monitor their infrastructure, users of IaaS or PaaS still to need to operate their own interface.
To date, a focus on security and control has led the finance sector to maintain its faith in on-premise installations and proprietary capabilities. But, this trend is declining. Many firms have adopted a hybrid approach, accessing more products and services via a cloud-based solution or deploying them in the public cloud, following a thorough cost/benefit analysis.
Opening up to the cloud
The security of cloud-based services has become equal or superior to tailored, locally-hosted setups. The industry can manage the challenge of complying with diverse data security and privacy regulations by outsourcing to public or private cloud operators for whom security is even more of a core competence than banks.
Both the service offerings and the customer service levels of cloud-based solution providers have achieved a growing degree of maturity and sophistication. This means that the scalability, flexibility and agility needed to adapt to fast-changing customer demands can be accessed both safely and cost-effectively. This enables banks to respond and differentiate in order to secure and grow competitive advantage.
The experience of operating in an open banking environment – in which efficient and secure partner collaboration and data-sharing via APIs is becoming a competitive and (under PSD2) regulatory necessity – is changing the mindset and skillset at institutions, both large and small. Increasingly required to aggregate components to build better services, rather than maintain proprietary platforms, banks’ IT teams are willing and able to scrutinise the merits of third-party solutions accessed over the cloud.
The maturity and flexibility of service offerings means there is no need for a ‘big bang’ approach to cloud adoption. Financial service providers can and are taking a nuanced, hybrid approach to the cloud, using different service models to meet different needs. Users can choose the pace and scale of their cloud migration.
Time for action
We are working to facilitate the future deployment of SWIFT interfaces in the cloud, enabling faster, more efficient and secure operations for banks, corporates, service partners, and other payments players.
We already host more than 2,000 customers on our current cloud solutions. Building on this expertise and gearing up for the future, we will soon release, Alliance Cloud, a private, cloud-based channel for connecting to SWIFT’s network of 11,000 counterparts, as well as providing messaging services, standards and solutions. It will be fully scalable, secure and available 24/7, allowing our customers to take advantage of new services, integrate new initiatives – both from SWIFT and across the industry – and adopt evolutions in API technologies.
In parallel, we are developing a new framework to ease deployment of SWIFT interfaces and connectivity in data centres of large public cloud providers, such as Microsoft, Amazon and Google Cloud. The initiative is entering the customer-testing phase and we are currently talking to large public cloud providers about how they can offer SWIFT connectivity via their platforms.
The costs and capacity benefits of cloud-based service provision are uncontested, but now that security and migration challenges are being addressed, the time is right for banks to accelerate their adoption. SWIFT is committed to providing a range of options for customers looking to take advantage of the benefits of managing their services in the cloud.