A little-noticed announcement could mark the beginning of the end of one of banking’s most enduring truisms: that traditional institutions are hampered by legacy systems.
Two community banks are now running their institutions in the public cloud. They’ve been doing this successfully for about five months. Both institutions worked with Finastra, their bank technology vendor, to adapt its Fusion Phoenix core system to run on Microsoft’s Azure cloud platform.
The implications reach far beyond the bank IT world. Retail bankers, marketers, digital banking heads, lenders and leaders of other banking disciplines will all benefit from removal of the shackles of legacy technology. Things won’t change overnight, of course, but the industry’s thinking has altered in regard to the cloud.
The distinction between public and private clouds is significant. Simply put, a private cloud is a web-delivered service not shared with any other organization. By contrast, a public cloud shares computing services among different customers, even though each customer’s data and applications remain hidden from other cloud customers, as described by Cloudflare.
For years most banks and credit unions have drawn a line in the sand over using the public cloud for the processing or storage of customer data. More and more applications became cloud-based, creating a whole raft of “as-a-service” acronyms — such as software-as-a-service, or SaaS. At the same time, many larger institutions, including Bank of America, developed private cloud arrangements. Yet the resistance to using the public cloud remained.
But now that line has been crossed.
While Bank of America and IBM made news in November 2019 with the announcement of their collaboration to implement what IBM describes as the first financial services-ready public cloud, its rollout is gradual, beginning with complex risk management calculations, according to Business Insider. The sheer scale of that program “validates the use of the public cloud by banks for customer-data applications,” observes John Weinkowitz, General Manager of Retail and Head of Product Strategy for Finastra. “That move will be a catalyst.”
While that program, and others, ramp up, Finastra states that it is the first vendor to migrate core banking systems to the public cloud. Its two client institutions already live on the cloud are Commerce National Bank & Trust, based in Winter Park, Fla., and Commencement Bank of Tacoma, Wash.
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