Monday, 15 April 2024

Cloud migration— Pandora’s box of data, culture and core replacement

5 min read

The cloud was the main topic of discussion at a tech roundtable, with leaders in digital innovation describing their experiences in core migration, challenges and best practices

The Building the Business of the Future roundtable was attended by leaders from financial institutions and fintechs, and it was not all silver linings. 

Fintech platforms have transformed the banking landscape through digitalisation, attracting millions of new users to financial services. However, there’s a concern that traditional players may lag behind big-tech and fintech counterparts in understanding and serving customer needs.

The cloud has played a crucial role in accelerating the digitalisation of financial services, seen as a strategic asset that expedites innovation and business expansion. The roundtable discussed practical considerations related to cloud adoption, addressing risks, and benefits of cloud migration. Topics included strategies for successful transformation, effective migration techniques, and optimising operations in the cloud.

Key topics covered at the roundtable included motivations for cloud adoption, different consumption models, mainframe transformation, data security concerns, maintaining compliance in a cloud-driven ecosystem, managing organisational changes, and preparing teams for transformative shifts. The panel aimed to foster a meaningful dialogue and equip participants with actionable insights and best practices applicable to their work environments.

Data integration and informed decision-making

In the era of big data, data integration and analytics are pivotal for banks to make informed decisions and optimise operations. Integrating digital technologies and operations optimise banking processes, leading to increased operational efficiency and enhanced customer experiences.

Panellists underscored the importance of high-level understanding of data connections and fostering a data-driven culture. By integrating data from disparate sources and systems, organisations can unlock valuable insights and streamline operations. However, data integration presents challenges, including data silos, data quality issues, and legacy data systems. Banks must invest in advanced data analytics capabilities and data governance frameworks to ensure data integrity, security, and reliability throughout its lifecycle.

Martin Buchholz, head of digital bank at CIMB Thai, highlighted the importance of acquiring the right data and developing maturity for effective data management. He also emphasised the importance of data quality, security, and compliance. Buchholz said that without the necessary data and maturity, organisations may struggle to derive meaningful insights and make informed decisions. He added: “If you don’t have the data, and the maturity to manage data, you have to forget it. You need the data somewhere that you can manage.”

Martin Buchholz, Head of Digital Bank, CIMB Thai

Arvid Swartsenburg, head of digital strategy and transformation at UOB, stressed the importance of aligning business strategies with digital operations to achieve streamlined efficiency and improve overall performance. Integrating digital technologies and operations optimises banking processes. He underscored the importance of understanding data connections. He stressed the need for a holistic view of data, spanning various systems and processes. Data integration drives informed decision-making and enables seamless operations. By integrating data from disparate sources and systems, organisations can unlock valuable insights and streamline operations.

Arvid Swartsenburg, Head of Digital Strategy and Transformation, UOB

Panellists from the banks were concerned about the use of third-party data sources. They advised against hasty data implementation without considering all necessary components but emphasised the importance of tracking insights derived from data that impact business outcomes positively, even when working with limited data.

They stressed the significance of leveraging data to drive business value and fostering a data-driven culture within organisations, and acquiring a high-level understanding of data connections and effective communication in the language of data.

Also on the table were challenges related to compute scale and data management during high-volume periods, exploring the benefits of using cloud-based data solutions and offloading core services, as well as leveraging new cloud-based offerings.

Tactics in modernising technology and migration

The focus remained on the importance of modernising technology stacks and utilising cloud capabilities to scale up operations and deliver tailored products to customers. However, legacy infrastructure stands in the way of core migration. One suggestion was the implementation of a dual core engine approach to gradually introduce new functionalities while preserving existing infrastructure, thus addressing core banking challenges effectively. 

John Howard Medina, chief operations officer of the Philippine Bank of Communications (PBCOM), shared insights on the successful establishment of a sub-digital bank and the exploration of further cloud adoption. PBCOM’S continuous efforts to leverage cloud technology for enhanced operations and innovation serve as a revealing case study for other financial institutions.

Medina said: “We’ve successfully created a sub-digital bank that operates entirely on the cloud. Now, we’re actively considering which other parts of the bank can be migrated to the cloud.” By successfully creating a sub-digital bank operating entirely on the cloud, PBCOM demonstrated the transformative potential of cloud technology.

John Howard Medina, Chief Operations Officer, PBCOM

Mambu’s Thailand country manager Woratep Yunyongkul agreed, suggesting that one way of helping banks to reach clear goals without disrupting current operations was to implement a dual-core engine and new functionalities, while preserving existing infrastructure. Efficient cloud operations necessitate organisational change. Banks can navigate potential challenges and maximise benefits using this pragmatic approach. 

Woratep Yunyongku, Country Manager, Mambu Thailand

Jarut Nakaramaleerat, financial services industry consultant from Google Cloud, talked about offloading core services and leveraging new cloud-based offerings. The conversation highlighted the significance of effective cloud operations and managing organisational change for successful digital transformation. 

Jarut Nakaramaleerat, Financial Services Industry Consultant, Google Cloud

Scalabilty, data security and compliance

Cloud scalability is a game-changer for banks aiming to deliver personalised products and services to their customers. By putting everything on the cloud and focusing on scalability, banks can ensure that the right products are offered to the right customers, enhancing customer satisfaction and overall business growth.

Harnessing cloud technology allows banks to analyse vast datasets, identify customer preferences, and tailor offerings to meet individual needs. The ability to scale operations rapidly enables banks to adapt to market changes, launch new products swiftly, and remain competitive.

David Jimenez Maireles, chief experience officer and co-founder of TNEX said: “It is important for us to focus on what we can put on the cloud to scale up, and focus on getting the right product for the right customers.”

David Jimenez Maireles, Co-founder and Chief Experience Officer, TNEX

While cloud technology offers numerous benefits, its implementation presents challenges that banks must address to ensure successful adoption. One of the most significant challenges is data security and compliance. With stringent regulations governing the handling of financial data, banks must prioritise data privacy and cybersecurity to maintain customer trust.

Another challenge is ensuring seamless integration of third-party data sources within the cloud environment. Banks often rely on external data providers for valuable customer insights and risk assessments. However, integrating third-party data sources requires thorough assessment to ensure data accuracy, reliability, and alignment with regulatory requirements.

Colin Dinn, chief of information technology and digital transformation at Vietcombank, addressed the challenges of scale and the advantages of cloud-based data solutions. Cloud technology provides banks with the capability to manage large volumes of data efficiently, resulting in improved data-driven decision-making and operational effectiveness. 

Colin Dinn, Chief of Information Technology and Digital ransformation, Vietcombank

He highlighted the significance of addressing data complexities and the challenges of handling large volumes of data, and emphasised the necessity of robust data governance practices. He cited the importance of establishing structured processes and frameworks to ensure data integrity, security, and reliability throughout its lifecycle. 

Data-driven decision-making is the cornerstone of successful cloud implementation in the banking industry. To harness the full potential of data, banks must build a data-driven culture within their organisations. This culture entails effectively communicating data, promoting collaboration, and fostering data literacy among employees. Empowered with data-driven insights, employees can uncover new business opportunities, enhance customer experiences, and drive overall business growth.

Data implementation involving third-party data sources and legacy systems is a complex process that banks must navigate to optimise cloud adoption. Integrating third-party data sources requires a cautious approach to ensure data accuracy, reliability, and compliance.

The panel discussed the significance of tracking insights from data and employing advanced analytics techniques to derive meaningful insights and create functional models. Banks can leverage data analytics to understand customer behavior, market trends, and operational performance, empowering them to make strategic next-step decisions.

Dinn emphasised the need for a cautious approach when integrating third-party data sources. A thorough assessment ensures that data is accurate, trustworthy, and aligned with regulatory requirements. Swartsenburg elaborated on the significance of tracking insights from data. By effectively tracking and analysing data, organisations can gain valuable insights into customer behaviour, market trends, and operational performance. Medina highlighted the challenges of limited data and the importance of effective data utilisation. Organisations must employ advanced analytics techniques for meaningful insights and functional models.

Employing a gating process to evaluate third-party data sources ensures data quality and reliability. At the same time, innovative solutions, such as data anonymisation and encryption, can address data privacy concerns and enable seamless integration within the cloud environment.

The discussions reaffirmed the transformative power of cloud technology in the financial services industry. Adopting cloud-based solutions ensures scalability, flexibility, and cost efficiency in technology stacks. Effective cloud migration demands thoughtful data implementation and integration of third-party data sources, alongside managing organisational change. Leveraging data for business value and nurturing a data-driven culture stand paramount in driving successful digital transformations. The journey to successful cloud implementation is a strategic endeavour that requires careful planning, critical areas of hothousing and collaboration, and continuous innovation.  

Keywords: Cash, Financial Regulation, Digitalisation, Fintech, Cryptocurrencies, Regulatory Frameworks, Consumer Protection, Data Security, Lending Platforms, CBDC, Stablecoins, NFTs, Taxation, Risk Management, AML, Volatile Investments, DeFi, Financial Inclusivity, Fiat Currency
Institution: SEC, CFTC
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