Changing Paradigms in Banking

It was interesting to see the announcement that BBVA are moving their mail and office services to the cloud. I have been debating with a number of colleagues from the banking industry the future of the cloud in banking.

In the wider services and financial services world, that is less tightly regulated than the big banks, it is clear that they are already making the journey to cloud based computing. Whether on cloud based PaaS services such as Salesforce for CRM, or on Google or similar for document sharing and mail, or on an IaaS service for comprehensive corporate computing. However it is also clear that many of the mainstream banks have fears of data protection, security, and various other issues, not to mention the regulators reactions to moving any of their core business out to the cloud. Some are trying it in small areas such as risk computations where the data is so fragmented, it is useless until reassembled, and some are trying small pilots, but few are moving wholesale like BBVA. This inertia is not least caused because of the inability of big organisations to make big strategic decision in a clear and easy way, especially with the complexity of the financials (as you may have read in my other blog posts), but clearly the regulatory and reputational fears are also a big considerations and hurdles too.

I have been wondering whether we might see the emergence of very large private clouds shared between the banks, rather like Swift was created as a consortium to offer secure but shared networks for the early banking industry. This probably needs a large prime mover, whether that is one of the information providers such as Bloomberg or Reuters developing a new service to the banks, one of the big banks themselves going it alone, or in a small scale syndicate then spreading the net wider as happened in the early days of Swift, FIX and other cooperative ventures, remains to be seen. However, right now, I am betting, that whilst they will experiment, few of the big financials organisations will take the leap of faith BBVA have into the full public cloud services. Although, I know they will be watching the project with care. If I had to place any bets, I would bet on one of the biggest payers creating a large cloud joint venture by outsourcing all their services to a big vendor, and then offering a shared private ring-fenced secure service to the other players. Who knows? Only time will tell. What is clear is the trend is not going to be ignored.