Author: Clayton Locke
Taking a closer look at how the Cloud could change digital banking and financial services
Banks and financial services companies are still slow to embrace the migration of computing resources from proprietary data centres to the Cloud.
This is perhaps not surprising, given that privacy and security are of paramount importance to the industry. For many in financial services the Cloud appears to be a daunting undertaking.
Delivering an optimal user experience
With financial services applications increasingly split between digital experience and back-office, between systems of engagement and systems of record, hybrid cloud solutions deserve a closer look. It is the go to infrastructure for delivering an optimal user experience at a lower cost. The Cloud presents an opportunity to be grasped for the financial services organisations that succeed in getting to grips with it, and is a rising tide that will threaten those that can’t.
That’s because the Cloud is more than just a technology trend, it’s a transformation in the way that we think about computing.
Although the Cloud is made up of vast numbers of individual servers, their resources are pooled by a sophisticated software layer that makes them available to service operations as a single, abstracted, seamless resource that’s shared and reallocated dynamically.
Cloud services like Amazon’s EC2 or RackSpace Cloud separate operators entirely from the complex demands of hardware provisioning and maintenance. The underlying technology of the Cloud is presented as a utility that puts your operators in control. It’s like a power station that supplies electricity to your business, but puts you in control of the power generation.
In the Cloud you pay for what you use and dial your resources up and down to meet demand.
Because computing resources and storage are entirely separated from the underlying physical layers, data can be stored literally anywhere in the world—or even stored in many different places simultaneously—without users needing to know where or why.
That’s great for performance and redundancy but whilst data might move across physical borders seamlessly the law does not.
Regulations like the USA’s Health Insurance Portability and Accountability Act (HIPAA) and the EU’s Data Protection Directive determine how and where data can be stored throughout its lifetime.
Security in the Cloud also presents a unique set of challenges. The attack surface is arguably larger but certainly different. In the ‘All-in Cloud’ data protection must be entrusted to a third party operating a resource shared by many.
Faced with these challenges the answer for many in financial services has been to limit use of the Cloud or to avoid it entirely. For some though, the answer will increasingly be the Hybrid Cloud.
The Hybrid Cloud
The recent emergence of Infrastructure as a Service platforms has allowed organisations to start creating their own private ‘Clouds’ which can be combined with public Cloud infrastructure like AWS to create Hybrid Clouds.
The hybrid approach carves a middle way between traditional data centres and the public Cloud by applying the ‘computing as a utility’ paradigm to computing resources under the direct control of an organisation. Hybrid Cloud puts the application tier in the Cloud, but keeps the database tier in the proprietary datacentre. It allows organisations to draw a line between the services and data they’re prepared to commit to third party platforms, and those they’re not, maintaining the high-security of data whilst taking advantage of the performance and efficiency of the Cloud. By moving the application tier and in-memory data closer to the global user, and through the scale and resiliency of the availability zones, the organisation will deliver a better end-user experience.
The great potential for financial services is to adopt the model that’s increasingly popular in healthcare – to use Hybrid Clouds to retain control over sensitive data whilst sharing it seamlessly, but transiently, with other systems based in the Public Cloud that will use it.
By passing data to the Public Cloud only when it’s needed, and minimising Public Cloud storage to a caching layer, the amount of data outside the proprietary firewall and security systems is kept to a minimum.
Research by Goldman Sachs predicts that in the five years up to 2018 spending on Cloud Computing will enjoy a compound annual growth rate of 30%, compared with 5% overall of Enterprise IT.
Computing as a utility is here to stay and Hybrid Cloud represent a realistic solution for banks and financial services organisations looking to meet their regulatory obligations and security requirements, while reducing costs and delivering an improved digital experience to their customers.