Cloud Banking

Why FIs Are Taking Payments Multi-Cloud

Payment Processes And Multi-Cloud Environment

With back-end digitization no longer an option for the financial services sector, adoption of cloud infrastructure is a vital — yet often painful — process for financial institutions (FIs), FinTechs and other organizations.

The biggest friction points are often traced back to the sheer size of the project. Migrating apps and data from on-premise systems into the cloud can seem an overwhelming task, and indeed, there are many pitfalls and mistakes organizations can make in the process.

Ariff Kassam, chief technology officer at NuoDB, spoke with PYMNTS about how firms can avoid some of these traps to ensure they can realize the operational, security and cost benefits that migrating away from in-house data storage can bring to their payment operations. The goal, he explained, isn’t simply to dump everything into a single cloud; rather, a multi-cloud ecosystem offers the greatest impact.

Technical Debt

Although FIs and organizations now widely agree on the importance of cloud migration, there isn’t a single way to begin the journey. If firms aren’t strategic about the process, warned Kassam, they can still accumulate what he described as “technical debt” in the cloud.

Traditionally, legacy systems can weigh down institutions with this “debt,” but increasingly, more firms are finding themselves saddled by constrictive and friction-filled limitations even as they embrace the cloud.

“People will make mistakes,” he said. “Whether they are due to a lack of understanding or experience, they make certain architectural decisions as they migrate to the cloud that ultimately result in technical debt, which will need to be changed, or rebuilt later on.”

This often occurs when an institution begins the cloud migration journey, and while it may be a quick way to achieve at least some level of cloud migration, it can involve a lot of trial and error — and is not the most optimized way of doing so.

From In-House To Multi-Cloud

The concept of migrating applications and data to multiple clouds, let alone just one, may seem overwhelming, but Kassam laid out gradual steps that institutions can take to make the task more easily attainable.

Indeed, firms can begin by starting with a single cloud, and building a new application or migrating an existing application to one of the big players — Google, AWS or Microsoft Azure.

“The journey begins by just having a single cloud environment and hooking data up from your on-premises system to that single application,” explained Kassam, noting that this guides entities toward a hybrid model.

Once firms “get their feet wet,” he continued, they can migrate other apps to different cloud providers. This hybrid approach creates a hub-and-spoke model that allows firms to get experience with multiple clouds.

There is an array of benefits to wielding multiple cloud service providers, he said.

It mitigates against the risk of a loss of service or vendor lock-in because if one service goes down, others are likely still running. It also enables organizations to take advantage of competition between leading service providers, and to shift a higher volume of transactions or workload to different providers as they lower prices.

But one of the largest benefits of single cloud and multi-cloud environments is scalability — not only the ability for the cloud to fluctuate capacity to meet periods of high-volume transactions, but also the ability to shrink during moments of less activity.

Typically, organizations will over-provision their systems to ensure they have capacity for peak moments, which typically means high expenses.

“With on-premise, you’re typically stuck with the size of your hardware,” said Kassam. “If you’re underutilizing it, you’re wasting money. If you’re over-utilizing it, you run out of capacity.”

A Focus On Data

Preserving the integrity of data as it moves from on-premise systems to the cloud is vital for financial entities to successfully modernize.

For entities concerned about data security, Kassam assured that cloud service providers have far more resources and expertise than any single organization to protect their systems. The bigger challenge is more often the ability to ensure that data can seamlessly flow between clouds.

While cloud service providers will often provide hardware resources, institutions must ensure the databases are cloud agnostic. Kassam said this is another area of “technical debt” if an organization mistakenly chooses a cloud-specific data solution. Using cloud-specific data solutions prevents organizations from moving to a multi-cloud solution. It also increases the complexity of supporting the hybrid hub-and-spoke model.

“You need to plan for a cloud-agnostic architecture, from both an application and a data perspective,” he said.

Choosing the right third-party service providers can be tactical. Beyond the cloud service providers, other partners like NuoDB can not only guide entities in their cloud migration journeys, but also facilitate connectivity between clouds to elevate performance.

As more FIs begin to migrate to the cloud, and as more FinTechs embrace the multi-cloud model, there are numerous pitfalls that can knock their digitization journeys off course. Yet by taking a gradual approach to the transformation, and working with the right partners, organizations can arm themselves to overcome what would otherwise be a monumental task and embrace modernization.



About: Accelerating The Real-Time Payments Demand Curve:What Banks Need To Know About What Consumers Want And Need, PYMNTS  examines consumers’ understanding of real-time payments and the methods they use for different types of payments. The report explores consumers’ interest in real-time payments and their willingness to switch to financial institutions that offer such capabilities.