FT Global Banking Summit 2021

Has Cloud Banking finally come of age?

Pick up a newspaper or listen to a podcast these days, and you could be forgiven for thinking that cryptocurrencies and artificial intelligence are the only things keeping the banking industry awake at night. In and amongst the other issues of real importance to the future of the industry is cloud banking, which is very much a hot topic in the Financial Services world at the moment.

Last Thursday, I was delighted to join Joy Macknight, Editor of?The Banker,?Graham Corr, Senior Financial Services Industry Consultant at?Teradata?and?Iana Dimitrova, CEO at?OpenPayd to discuss whether cloud banking has finally come of age.

We discussed the advantages that new paradigm banks, such as illimity, have in being cloud native and the challenges faced by incumbent banks in?migrating over to cloud-based IT systems.

State of the art infrastructure, security and safety of operations, speed of implementation, total flexibility and low operating costs without any upfront investments are just some of the many advantages cloud native challenger banks?have over industry incumbents who have yet to make the all important transition to the cloud. It’s not a stretch to say that we would not have created Italy’s first?banking unicorn, illimity, in such a short period of time, without the clear strategic advantages cloud technology brings.

Of course,?I’m aware of the problems the adoption of cloud technologies in big mainframe based banks can cause. If you are a startup bank developing your own proprietary IT architecture, the decision to be cloud native is, in my opinion, a no brainer. If you are a small or mid-sized bank outsourcing IT systems to an IT service provider, you simply have to raise your requests to your supplier and leave them to improve the performance.

But if you are a large bank with a mainframe based IT architecture, the choice on which route to take is more difficult - simply adding a cloud layer to a non-cloud IT system could make life even more complex and inefficient. Meanwhile, building a totally new cloud based IT system side by side your traditional one to fully migrate on it once completed and tested, could be a very long, expensive and risky exercise.

An alternative pragmatic approach might be the following: take one component of your bank at a time (commercial banking, rather than private banking or others), develop completely new cloud IT systems for these separate components and integrate them in the overall system as if they were separate subsidiaries, then when most of the bank components are on cloud IT systems, make the final jump. We should always remember complexity is the main enemy of good performance.

Another main focus of the discussion was what a challenger?bank can do to ensure it is ?successful. Operating within a?underserved area of the market, which, in illimity’s case, is credit to SMEs, is critical to?success, as is developing an innovative business model to serve such a market with competitive advantages that must be defendable over time: technology and skills in our case.

In less than three years, illimity has grown to 750 people coming from over 300 different companies and organizations. It’s all very well to harness the power of modern technology to grow successfully, but we would be nothing without our people, so it is also essential to bring together different aptitudes, experiences and training to make an environment which is both creative and open. Get it right, and this is what a successful challenger bank can look like.