1. Cloud Computing
Providing Horses For Courses
In the last five years, an increasing number of banks and financial institutions have adopted cloud-based technologies. It is seen as
the next ‘hot technological trend’ in regions including UK, US, Africa, South-East Asia, Asia-Pacific and Australia. Cloud-based IT
solutions offer an attractive opportunity to reduce upfront investment in IT systems and resources. Another luring aspect is that
customers no longer have to wait for years for the implementation to complete, they can often immediately get access to the solution
after signing the contract.
This in no way means that the bigger players are not in the game. Major global banks have publically announced cloud investments
in IT infrastructure as the next high priority investment, followed by cloud investments in corporate banking, retail banking, and
payments. Here too, a lower IT cost plays a critical role and the solution allows the big players to easily and quickly expand into new
geographies.
*Ovum report: The Critical Impact for Cloud in the transformation of Retail Banks
As quoted by Nestor A. Espenilla Jr. (Central Bank Governor of Philippines), “Cloud computing can increase the
competitiveness of our smaller banks. For smaller banks, this is a cost-effective way for them to store and manage their
data without having to invest in infrastructure”
According to an Ovum report*, in 2014, at least 70.5% of the retail banks were considering Software-as-a-Service (SaaS)
as a deployment model, and 61% were spending up to 40% of their net spending on Infrastructure-as-a-Service (IaaS)
Today, small banks, new entrants to the banking industry and financial institutions (FI’s) backed by latest technology are able to gain
share of the market that was once dominated by the bigger players. Through the ‘Pay as You Use’ SaaS model, these institutions are
now using cutting edge technologies despite limited finances and are even competing with established banking institutions. New
entrants are strategically leveraging low cost cloud solutions to offer reduced borrowing rates and higher interests on savings to gain
a competitive advantage over the existing players burdened with high cost infrastructures.
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2. Public cloud also offers other benefits like agility and innovation. However, the Banking and Financial industry needs high data privacy
and security, which is why 70% of the major global banks are using private cloud. It not only helps cut costs, but gives a better and
complete control over the entire system and resources.
Different regions across the globe have shown varying levels of interest in cloud-based technologies. Be it in Africa, where some FIs
are already leveraging this technology and others have demanded the same at microfinance events. In Philippines, the regulatory
framework is being amended to promote cloud in the banking domain. Similarly in the UK, various building societies have already
adopted this solution, and other regions too are showing high interest. As a whole, cloud has picked up pace and popularity
everywhere.
Offering a cloud-based solution also has significant implications for IT vendors on their sales and support approach. It is vital to
understand customer requirements in detail and offer the appropriate cloud solution (public, private, hybrid, etc). Selling cloud
solutions involves key technology discussions and is consultative in nature. The implementation and longer term support relationship
is also different to traditional software, with the vendor being highly focused on ensuring customer success is achieved quickly and
consistently to ensure continued use of the service.
To conclude, cloud is transforming the banking and financial sector like never before. For some banks and FIs, cloud is becoming an
inevitable criterion for selecting a software solution. Now that the cloud market is picking pace, offering this solution will prove to
be a competitive advantage over other players in the near future. Probably in the coming few years, cloud computing will be a point
of parity and not difference.
ABOUT THE AUTHOR
Arup Das, Vice President and Lending Product Head (P&L Management)
Mr. Arup Das is the Vice President and Lending Product Head (P&L Management) at Nucleus Software
where he is responsible for taking the flagship product to the next level of global leadership. Before
joiningNucleus,heheldavarietyof rolesinstrategyandproductmanagementwithleadingcompanies
including CISCO, IPValue and Mphasis.
Nucleus Software is the leading provider of mission critical lending and transaction banking products to the global
financial services industry. With three decades of expertise and experience, today, it powers the operations of
more than 150 companies in 50 countries, supporting retail banking, corporate banking, cash management,
internet banking, automotive finance and other business areas.
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