APAC’s Traditional Banks Are Shifting to a Cloud-First Strategy to Combat Digital Banksby Fintech News Singapore March 2, 2022
Growing competition from new cloud native technology players, and rising demand from customers for digital-first, intelligent services are forcing banks in Asia-Pacific (APAC) to migrate to cloud-based infrastructure and become data-driven, an extensive report by the Asian Banker says.
The report, which draws on interviews with cloud providers and banks across the region, shows that most banks have embraced the cloud as they strive to become more agile, improve speed to market, and lower their operating costs.
Conor McNamara, managing director of Amazon Web Services in ASEAN, said he’s observed rising adoption of the cloud by financial institutions in Southeast Asia, especially “an acceleration in the midst of the pandemic.”
“Customers are migrating core financial services workloads to the cloud. Organizations are moving data centers, making large multi-year commitments,” McNamara told the Asian Banker. “They are embracing the cloud to harness the untapped power of their data, turning data into insights.”
UnionBank of the Philippines moved from an entirely on-premise infrastructure to a cloud-first policy about five years ago, and is now aiming to become a cloud-only bank within the next two years. The bank’s early bet on cloud computing has facilitated the transition to work from home arrangements when COVID-19 hit.
“You’re only as fast as your infrastructure,” said Henry Aguda, Chief Technology and Operations Officer, and Chief Transformation Officer at UnionBank.
“I can’t talk enough about how resilient the cloud infrastructure is. When it comes to speed, being able to be agile, as well as being able to scale at will, our cloud helped us a lot.”
At Singapore’s United Overseas Bank (UOB), embracing the cloud has enabled it to make use of customers data and deploy artificial intelligence (AI) and machine learning (ML) to offer intelligent customer-centric services and digital-first products.
“Cloud is relevant for scalability, elasticity, as well as capability, especially in the realm of AI, ML, and real-time data processing and insights delivery,” said Johnson Poh, Executive Director, Head, Group Enterprise Artificial Intelligence at UOB. “At the same time, cloud also offers efficiency, right in terms of costs, and processing capacity.”
For Vietnam Technological and Commercial Joint Stock Bank (Techcombank) becoming cloud-first was a no-brainer, especially considering the exponential growth in usage digital channels and digital transactions the bank has seen over the past few years.
“Just imagine what we needed to do to bring in, the amount of servers, what we needed to configure and buy in order to deal with that increase 70 times over the last five years, and the peak capacity five times of what is normal,” said Jens Lottner, CEO of Techcombank. “That has just led us to come to the conclusion that as this growth continues, this physical world just doesn’t work for us. Because we cannot be as quick as we need to buy these physical servers.”
In September 2021, Techcombank announced a partnership with Amazon Web Services (AWS) to move to the cloud. The migration started with non-critical applications but will eventually move to critical applications within the next three years.
“We are trying to get to a situation where our capacity can be flexed up instantly and be much more reliable than what we have seen in the past… The bank therefore needs to be digital and cloud first,” Lottner said.
“Cloud for us is actually not really an option or a choice, but it really is a must, and we need to do.”
The hybrid multi-cloud strategy
Looking at cloud trends across APAC’s banking industry, the Asian Banker notes that an increasing number of financial institutions are embracing a hybrid multi-cloud strategy, using services provided by at least two public cloud providers combined with private clouds and on-premise infrastructure.
While traditionally, companies only had two options for cloud migrations, either easily accessible public clouds or customizable private cloud solutions, today’s hybrid cloud environments are expanding the possibilities for cloud infrastructure models, allowing organizations to get the best of each world.
With a hybrid cloud, data available to customers can be stored on a public cloud server while sensitive data and information can be kept secure in-house, reducing thus the cost and complexity of storing huge amounts of data on physical data centers. And with a multi-cloud strategy, banks can choose the combination of services that make the most sense to them while providing developers and operators with common frameworks and tools.
Around the world, a number of banks have embraced the concept. JP Morgan Chase is executing a four-cloud approach, working with Amazon, Google and Microsoft in addition to running a private cloud. In Hong Kong, WeLab Bank was the first multi-cloud digital bank to launch in the city back in 2020, operating on multiple clouds at the same time to increase operational resilience and disaster recovery capability.
But it’s not just banks and financial services companies that are turning to hybrid multi-cloud environments. A survey of 750 vetted IT professionals conducted by American computer software company Flexera in late 2020 found that a staggering 92% of respondents reported having a multi-cloud strategy. Of these, 82% indicated taking a hybrid approach, combining the use of both public and private clouds.