Technology

Banks are increasingly converting to cloud computing

The trend started before the pandemic, but the sudden closure of branches and offices in March 2020 forced banks to rely even more on online systems.

Toronto: Big Canadian banks are changing.

Faced with increasing competition from startups, rising customer expectations, and growing digital demand, banks are accelerating their transition to the cloud.

The trend had started before the pandemic, but the sudden closure of branches and offices in March 2020 forced banks to rely even more on online systems, according to Robert Vokes, managing director of Canadian financial services at Accenture.

“In March 2020, everyone suddenly realized that they needed faster service. It was a serious warning, ”he says.

Cloud-based systems, sometimes managed by banks but more often by third-party technology companies, allow data to flow faster and more freely. Banks can more easily characterize each customer, automate even more, and save money.

The idea has been around since the internet bubble, but the team has only been able to make it happen for a few years, adds Vokes.

“We didn’t have the technical means, but the technology has caught up.”

Several banks have entered into agreements with companies that offer cloud services in recent months. For example, CIBC signed a contract with Microsoft Azure, Scotia with Google Cloud, and BMO with Amazon Web Services.

BMO has just completed a major first transformation of its system since its agreement with Amazon by transferring all its financial activities to the cloud, an operation that required transferring the equivalent of a thousand data servers.

The bank decided to go ahead because it is now convinced that the cloud infrastructure is well established and reliable, says Sid Deloatch of BMO.

“We have reached the threshold. We felt that the technology existed. We are convinced that it exists now. That is why we are moving forward ”, he said.

The transformation will allow BMO to offer automated loan decisions. You can save up to 30% on your operating costs.

According to PwC’s Sanjay Pathak, banks were reluctant to take the plunge due to the large number of files accumulated on older systems over the past decades.

“Unraveling everyday activities from ancient techniques is very, very complex. It can be very risky and disrupt a business, ”he says.

Convincing management has been a very difficult task, because the switch to cloud computing means giving up control over the infrastructures that have been in place for several decades. However, banks can no longer fall behind in this area due to pressure from their customers and the expectations of their employees who want more homogeneous procedures, says Pathak.

The smaller banks were able to act faster. In this way, EQ Bank was able to move to cloud computing in 2019. Young financial startups were able to start their activities directly in the cloud, forcing banks to react.

“There is a lot of pressure on financial services from fintech companies. These have often seen the light of day in the cloud. They can move very quickly due to their full digital capabilities, ”says Hillery Hunter of IBM Cloud.

According to her, several banks are moving their core systems to the cloud because so much of their data needs to be integrated. This data must be readily available to be able to make certain decisions on the spot, particularly for loans.

“Consumers have become quite impatient. They hope that things will be available immediately. “

Concerns

However, the use of a third party to store personal financial data raises concerns among some regulators.

The Bank of England said in October that measures are needed to “minimize the risks to financial stability created by the concentration of services provided by a third party.”

Canada’s Office of the Superintendent of Financial Institutions released a draft guideline earlier this month on managing technology and cyber risk. He said banks and other financial institutions should plan smart exit strategies and consider data portability from one cloud service provider to another.

The Office expects to publish guidelines specifically targeting third-party companies in early 2022.

Data security and ensuring that high-tech companies don’t have too much power to dictate their terms are top concerns, says Pathak. These companies have the size and speed to become a threat, he says.

“The tension is growing. Cloud providers are becoming competitors. They are a real threat to the banks ”.

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