How Up Is Tapping Cloud Solutions For Flexible, Technology Oriented Banking

Financial institutions are embracing cloud technologies to roll out innovative tools and services, but selectively upgrading infrastructure isn’t enough, says Michael Morris, chief technology officer for Australian FinTech Up. In the latest Digital Banks And The Power Of The Cloud Tracker, Morris discusses why FIs should take a bottom-up approach to upgrading cloud infrastructure or risk getting left behind.

The debate about cloud technology’s place in the banking industry has moved beyond whether such platforms can safely transfer and store sensitive financial information. Financial institutions (FIs) are no longer asking whether cloud-based platforms and solutions should be integrated into their platforms, but rather which solutions should be used and where to find them.

Cloud-based banking technology can help FIs keep up with digitally savvy customers, but banks must realize that no single tool is sufficient to meet their needs. FIs looking to craft products that appeal to tech-savvy consumers must ensure that they are reimagining how they build and launch their financial products, keeping technology top-of-mind, Michael Morris, head of technology at Australian FinTech Up, explained in a recent interview with PYMNTS. The company launched in October 2018 and is now used by more than 250,000 consumers in the country, relying on Google Cloud Platform to host and run its online and mobile features.

“I see a lot of other companies — other banks, actually — go, ‘Up is using [the cloud]. If we use [the cloud], we will also be innovative,’” Morris said. “I think that misses the point. Fundamentally, we are a technology company making a bank as opposed to a bank trying to make technology. While we see organizations adopting [the] cloud, what they actually have to do if they really want to be successful is [to] reinvent themselves as technology companies and put the engineering and the technology at the very pinnacle of their organizations.”

The cloud should be an essential component of technology-oriented FIs’ strategies, as cloud platforms can allow banks to rapidly roll out innovations and personalized features that bring users the speed and service they expect from all digital technologies, Morris noted. The cloud can also give banks the flexibility to swiftly respond to large-scale events that affect customers, such as power outages, security hacks or other external issues.

Tapping The Cloud For A Swift Innovation Cycle 

Cloud technologies offer several key advantages for FIs looking to create digitally-focused banking platforms. Banks have more choice in how they structure their cloud platforms than they did earlier in the technology’s life cycle. Private cloud innovations can allow FIs to keep their data siloed as it would be on physical mainframes, for example, while public cloud platforms enable more speed when it comes to rolling out new tools and communicating with customers.

“[Up is] hosted in public cloud,” Morris said. “We first moved to [the cloud] in July 2017, so a bit over a year before we launched publicly. It was a very methodical and deliberate process to go through all the assurance steps to make sure that everyone was comfortable with what we were doing.”

Up uses Google’s cloud platform combined with its own bespoke configurations to ensure its features can run smoothly, he said, which promotes the flexibility necessary to develop new products or solutions geared toward seamlessness. The bank can automate processes like regression tests — in which FIs test-run programs’ functionalities after they have made changes or upgrades — that traditionally take banks weeks to finalize, especially as FIs add more functionalities to their online platforms.

“For us, [innovation comes with] a heavy reliance on automated testing,” Morris said. “As an example, [for] every single code change that an engineer makes, we spin up about 25 full copies of our core banking platform, like a mock of it, for the individual Android and iOS applications to hit, and that is something that is really, really easy on cloud but far harder with traditional [core banking] infrastructure.”

The more complexity attached to FIs’ digital banking infrastructures, the longer these traditional tests take, as they must be routed through manual servers or in some cases overviewed manually by human employees. The cloud can cut these processes down from two to three weeks to about 30 minutes, Morris said, making it much easier — and much more cost-effective — for FIs to roll out new features for digitally-minded customers. This efficiency enables banks and FinTechs to craft updates to their platforms and software at speed, matching the rapid shifts of consumers’ needs.

Security, Speed And The Cloud 

Cloud technology also promotes more transparent communication. Placing one’s core banking infrastructure on the cloud can keep customers’ details secure as well as help banks communicate clearly with users if data breaches or other service disruptions occur. Morris described a 2019 incident in Australia in which a critical piece of the nation’s ATM infrastructure was accidentally damaged, leading to outages of bank cards and payments across the country. Effectively and efficiently communicating the issue to customers was banks’ top priority, but it was vastly more difficult for legacy FIs that did not have services set up on the cloud, he noted.

“What we were able to do then is … immediately scale up our infrastructure to three times its normal size,” Morris said. “Then [we sent] a push notification to every single one of our customers saying, ‘This is what happened, we are working on the issue.’ Now, it turned out that [customers’] other banks [were] also broken, but they just did not have the mechanism to be able to communicate [that] to the customers.”

Marrying essential security with instant and personalized communication customers expect from online services will likely remain a major factor in establishing cloud technology’s importance in the space. Achieving this will require FIs to fundamentally change their cloud integration approaches and, ultimately, alter their strategies regarding technology and financial services innovations. Those that do not shift quickly enough could find themselves falling out of favor with digitally-savvy consumers.