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Monday, May 26, 2014

What about banking cores in Cloud?

First time that something like Cloud bases solutions for Core Banking came to my mind, looks like "costs saving model" or "economy of scale model", technically speaking the chance to have more control over code in just one location or distribution point than the common model of individual installations, if you know what I mean. The versions hell could come to an end. The model was so convincing that some other colleagues were thinking the same. "Yes, that´s the solution we were always looking for!"

And the dream did not end at that point, looked easy to grow. I came up with the design of a sort of Applications Market, a place where, the software house,  customers, partners, and developers with the right licence could publish applications in such way that the original product could be enhanced or enrich. The company´s president liked the idea, said it looked revolutionary. But then we faced retrictions from local regulations. As a matter of fact there are few countries that allow financial institutions to have their Core systems installed in the Cloud. You can hear about Temenos with some installations in Coopearatives in Mexico and its efforts to have its product, T24, over Windows Azure. Other initiatives come from Finacle, Denarius (actually DenariusOnline), Misys and others, but a company that is striking hard in the market is the german: Mambu.

Mambu has presence in more that 30 countries, mainly in startups from developing countries. There is still a long path to discover, starting with the right strategy since we have sensitive data, unranked providers, service availability. What if somebody like a fierce group of hackers decide to attack the digital fortress and at least cause service blockage?  The current accepted solution uses private clouds, few services running in this model. Institutions need to be cautious, adopt strategies that start with services that do not compromise their data, something like loan services and things like that.

Mambu experiences in Africa are worth to check, since the service is addressed mainly to unbanked. What about unbaked in the rest of the world. Roughly around 60% of population is underbanked or unbanked, What a Chance! If any financial institution offers cloud based services for around the 60% of pppulation and that service generates just the $1 in profits per customer, it´s is something to take into account. Servicing people that live far from populated and serviced centers can benefit from this kind of services.

Security is one key point that keeps financial institutions considering cloud more than the advisable, but there are other key points to consider, surpassing the old debated cost savings and opening doors to other subjects like agility, ubiquity, response speed, image, brand, etc. Salesforce is offering the first service for banks, based in the cloud ( Banks that opt for this service can nurture their leads from multiple channels, personnel from the bank will access all information from cloud repositories. Security is no more an issue with capital letters, with appropriate policies and infrastructure data is fully protected from unauthorized access.

Looks now that regulatory agencies in the majority of coutries are some steps behind, since local regulations does not allow to hang data in the cloud for financial institutions. But, it is just a matter of imagination and disruption to put business enabling services in Cloud Servers or hiring services as salesforce1. Technology does never sleep and banks should do the same.

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