–OCTOBER–26-29 “Everybody talks about payments moving towards the Cloud – becoming this $300billion market opportunity in the next five years,” says Ciaran Chu. “A lot of banks say they are committed to the technology, but a lot of the workloads being run, from a payments perspective, are still in their infancy.” As head of public Cloud services at payment solutions provider ACI Worldwide, Chu is involved in the digital transformation journeys of many of the 6,000 organisations it works with, including 18 of the 20 biggest banks globally. And while some may be slower than others, for those that ‘get’ Cloud’s full potential, he believes it can radically change the way they operate and their future profitability. And it all comes back to payments… MONEYFEST MAGAZINE: Can you give us a scene-setter – where banks are now and where they are heading to in their Cloud journey? CIARAN CHU: The big challenge many banks will have in the next three-to-five years is that their traditional business model is under attack: they’re able to charge less fees and interest rates are at an all-time low. So, we’ll see an acceleration of Cloud technology through artificial intelligence (AI) or other data aggregation services that allow them to create alternative value streams they couldn’t today on-premise. Those that will be really successful will move components incrementally to create value, assimilate the learnings and work in a truly agile manner. Ultimately, they’ll be able to unlock value and transform the business, piece by piece, diversifying their revenue, changing their cost base and, ultimately, spending more time on consumers and less on maintenance. A lot of banks and intermediaries I speak to, be they merchants or processors, are saying: “I want to have a faster speed to market. I acknowledge there may be more upfront cost involved in that because I’m running two platforms – I’m not fully optimised when I’m deploying it in the Cloud – but, ultimately, my major driver is to get faster time to market and increase my agility. By doing that, my expectation is that I'll get new revenue streams that www.money2020.com/moneyfest
I wouldn’t have got otherwise in the short term. In the long term, much as I’ve done in an on-premise environment, I’m going to optimise my workloads as much as possible, to ensure that my cost comes down.” MM: Are the neobanks really stealing a march over the 'heritage' banks? CC: The well-worn cliché is that neobanks can build everything from scratch that an incumbent would like to have, whereas the incumbent banks have the mass market adoption criticality. However, while, for example, US neobank Varo got its banking licence, we see the ability to get licences becoming more difficult in the US and Europe. What’s going to play in traditional banks’ favour is being able to work within ever-increasing scheme changes. On the other hand, the big advantage that challenger banks have is their DevOps kind of pipeline, building it from scratch, being able to use just the solution capabilities they need, when they need them – whether that’s core infrastructure or surrounding Cloud tools like data analytics or AI – because, from a consumer standpoint, it’s about being able to interact.
Ultimately, they’ll be able to transform the business, piece by piece, so they’re diversifying their revenue, changing their cost base and, ultimately, spending more time on consumers and less on maintenance Nobody gets it right first time, it’s about faster iteration, and neobanks can release on an hourly basis and get customer feedback, whereas a lot of incumbents are tied to being able to change their datacentres and hardware availability. MM: What other issues do incumbents face with Cloud migration? CC: Their biggest challenge is deciding what the right strategy is and committing to it, which comes back to culture. There are different approaches. The first approach
is the speedboat challenger bank, but there are a lot of startup costs associated with that. The second is tying what they’ve built back to their great data and insight and making that a frictionless experience. The third is ensuring they’re getting the right skills in. With a massive shortage of technology talent, they’re competing against big tech and fintech for the best. Otherwise, it’s the same people, with the same processes, just with a different name. The approach we’re seeing working really well is picking off a specific problem, like standing authorisation, putting that into the Cloud, then building off the back of that. We’ve got a couple of large global banks doing that and it means their guys are getting used to running it, they can optimise it, and it gives them a proof point to move more of their business processing in. It’s easier to take this approach, then think about how to define and design a slick infrastructure, then fit their data over the top, to ensure they reap the benefits of being faster to market. They can build their DevOps capabilities out from scratch, as opposed to trying to move their existing process and procedure across, and then work out how to do the DevOps piece. As I said before, it’s about unlocking business value incrementally. If they can pick off a piece of capability that’s causing them an issue, then execute against it in a timely manner, that helps start the flywheel, whereas migrating everything just because it’s the Cloud, without a business strategy or specific driver, is just swapping one thing for another. MM: How can banks move from innovation theatre to getting it done? CC: Their issue has not been a shortage of good ideas, it’s been the ability to bring them to life. Some very good innovation organisations have sat within banks, but when they get to the stage of bringing their ideas to life, they have to come back into the hurly-burly of the bank infrastructure and try to get their change prioritised in the in-house system. A quandary, for several years, has been how to keep an innovation hub as an entirely separate entity. Do they set up a fintech accelerator lab, as a lot of the banks have done? And, if so, how do you tie it back to the core bank capability?
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