Covid-19 Showed Financial Institutions Fast Change Is Possible
Banks may have surprised themselves at how quickly they were able to adapt their operations in response to Covid-19.
“The pandemic showed the industry that rapid change was possible,” said Scott Mullins, head of worldwide financial services business development at Amazon Web Services (AWS). “There had been hardly any appetite in the industry to try to go after modernization. That has changed rapidly. The pandemic was an accelerant. Organizations had to make some tech choices quickly for remote work or interacting with customers from digital perspective. Covid moved us forward very rapidly, and showed we could handle tech change much faster than we had thought.”
Financial services firms, from banks to exchanges, benefited from the power and flexibility of cloud computing.
Some of the initial reaction to the pandemic was to meet immediate needs, like supporting staff who were working from home, while others used it as a step toward deep transformation, added Mullins.
A global bank used Amazon Connect, a call-center service AWS designed in part to help companies get customer service agents up and running remotely, and sent home 6,000 customer service agents when the pandemic began, he said.
“The bank’s agents were operational with Amazon Connect in 10 days, a process that normally would have taken up to five months. At BBVA, using Amazon AppStream 2.0 enabled more than 86,000 employees around the world to work remotely, ultimately reducing implementation time by 90% compared to on-premises projects.”
Mullins said other banks have pursued deep modernization, Itau in Brazil has completely taken out its use of mainframes and gone to cloud to reinvent the experiences of 60 million users. JP Morgan announced a new digital bank in the UK and has said it will move its core to the cloud—based Thought Machine.
“People are willing to take on really transformational work in modernization.” Some are recompiling old code to run on the cloud, other are going in entirely new technology, and some are doing a combination of both.
“It’s not binary,” Mullins said of the choices they are making. “Often, the decision to recompile old code, employ new technology or pursue a combination is determined by what is going to bring customers the most value without being overly disruptive. When BB&T and SunTrust merged to form Truist, the new brand needed a seamless digital migration that reduced risk, allowed for integration and resulted in improved customer experience, while still maintaining the integrity of legacy platforms and security, and removing dependencies for speed. By creating APIs at different layers of its digital stack, Truist was able to build its user experience and user interface architecture on top of current APIs, and integrate with legacy systems.”
In some cases the choices depend on the available talent — firms may move to new technology because they can’t find technical staff who can, or want to, work with old languages.
“Our roadmaps for our technology are driven by inbound requests from customers and thinking ahead,” Mullins said. “If we find customers have a need that is not being met by their current services, we will build it, for financial services or for multiple industries — fraud prevention services, for example.
“Ninety percent of AWS products and services roadmap comes directly from customer requests; the other 10% of our innovations arise from needs that our customers don’t even know they need yet.”
AWS innovations for finance include Amazon Quantum Ledger Database (QLDB), a fully managed ledger database that provides a transparent, immutable, and cryptographically verifiable transaction log, and Amazon FinSpace, which facilitates the storage, cataloguing, and preparation of financial industry data at scale.
In response to a request for examples of customer success stories Mullins emailed several cases.
In digital banking innovation: Mox Bank Limited, one of the fastest-growing banks in Hong Kong history, went from initial licensing to market deployment of its cloud-native and digital bank in 18 months during the continuing Covid-19 pandemic. In the first month alone, it signed up over 35,000 customers. The cloud-based bank runs on AWS and provides a suite of services entirely digitally through its mobile app.
Personalization: Vanguard is using machine learning on AWS to personalize financial advice. The company used AWS services such as Amazon SageMaker to optimize rule-of-thumb recommendations with more sophisticated financial advice to maximize retirement wealth and spending for investors.
Open finance: Solarisbank AG, Europe’s leading Banking-as-a-Service platform, announced in November 2020 that it has successfully migrated all of its core banking systems, digital products, and databases to AWS, making it the first bank in Germany to fully migrate to the cloud. Solarisbank lifts the technological and regulatory barriers for its business partners to offer financial services quickly and seamlessly by combining the product range within its full German banking license with an API-based banking infrastructure.
Delivery transformation: Snowflake is an AWS Partner and delivers the Data Cloud— a global network where thousands of organizations mobilize data with near-unlimited scale, concurrency, and performance. Customers can easily use data they have in Snowflake from Amazon FinSpace, where quantitative analysts can find and access data from multiple sources to develop trading strategies and perform risk assessments. Capital One uses the Snowflake Data Cloud to understand the changes happening in the world and react quickly to address its customers’ evolving needs.
Financial services has a mix firms that want to build their own software and firms that rely on software built by others, Mullins added.
Although some regulators have talked of encouraging financial services firms to use more than one cloud provider for redundancy, Mullins said that has not become standard practice.
“The way most organizations are approaching this risk, the vast majority end up with 80-90% of their workloads with one provider. However, they may also take advantage of niche offerings or specialty use cases from additional cloud providers. But for core, mission-critical workloads, we see customers typically choosing to deploy these types of workloads with one cloud provider, and in the majority of cases they’re choosing AWS to power these systems.”
Looking ahead for banking in the U.S. he sees open banking, and open finance in general, coming soon.
“That started in Europe and expanded to Asia-Pacific and Latin America and now we are seeing it coming into the U.S. The pitch for open banking is that it gives consumers control over their information, and they can move their information to another financial institution. That’s been the promise.”
Implementation has its challenges, he added. It helps challenger banks because it makes it easy for customers to switch from their old bank to a new one. But even in the UK, where open banking is the law and challenger banks are popular, it takes time for customers to commit to a new bank, he said. Many still leave their direct deposit of pay with the banks they have been using for years.
“It will take time for those practices to evolve.”