Our Commercial Director Simon Goble shares his perspective on the state and future of technology for the banking sector, from cloud computing adoption to regulation.
How will the adoption of cloud computing impact the progression of core banking systems?
There are two types of cloud core banking system. The first are core banking systems that have been around for many years and were originally designed to be hosted by the end users, typically on their own premises.
The second are Software-as-a-Service (SaaS) systems, originally designed to take advantage of a public cloud deployment.
The latter has begun to replace the former in some cases, a trend that I expect to see continue. I believe the SaaS providers deployed via the public cloud will progress, because SaaS offers distinct advantages when it comes to the user. These include: lower total cost of ownership, automatic and more frequent upgrades managed by the primary service provider, and open API standards to plug in ancillary systems with lower integration costs.
What about regulatory requirements?
We have seen a major development in the UK, which should effectively remove the regulatory myth that core banking systems should not be deployed via the cloud. The Financial Conduct Authority (FCA) has just announced its “Proposed guidance for firms outsourcing to the ‘cloud’ and other third-party IT services”. One of the reasons behind this is to remove the barriers of entry for banks entering the market in the UK in a bid to stimulate competition.
The FCA states “Innovation can be a driver of effective competition, so we want to support innovation and ensure that regulation unlocks these benefits, rather than blocks them.” It may not be suitable for every bank yet, nor can you perform all core banking functions in the cloud, but progress is swift and I soon expect to see developments in cloud core banking to increase its universality and functionality.
Can the cloud offer competitive advantages to challenger banks?
An example of this in action is at OakNorth Bank. This challenger bank is using the Mambu cloud core banking system as reported by IBS Intelligence. As more challenger banks emerge, it will be fascinating to see the approach they take and whether cloud services for core banking becomes a powerful trend. From financial performance management software to credit card performance, cloud-based systems have powerful and affordable solutions to offer organisations such as challenger banks, microfinance and credit unions.
As part of my role at BankBI I have a front row seat to the developments in cloud core banking technology. I am lucky enough to be able to connect and work with both the innovators and adopters of this technology. One example of this is through the cloud-to-cloud integration that BankBI has built with Mambu.
For organisations with multiple branches, a cloud-based tool can save hours of manual spreadsheet handling, avoid versioning issues and more. Premier Credit discovered this for themselves when they started working with us.