Cloud considerations for financial institutions and wealth managers

There is no doubt now that core banking platforms will eventually move to the cloud. The question is not if or when, but how?

According to a recent study by Accenture, 97% of financial institutions have adopted a cloud strategy. Other industries have proved that the sensible use of private and public cloud platforms can bring immediate and far-reaching business gains, and wealth management should to be able to enjoy the same benefits.

Today and in the future, there are concerns centred on risk, data security and restrictions that affect where client data may be stored and processed. Regulators generally take the view that public cloud carries too many risks, and both banks and regulators agree that it must be possible to guarantee watertight security and rigorous safeguarding of data protection rights before public cloud platforms can be used for core banking functions.

These are valid concerns that need to be addressed, but it is important to recognize that such concerns do not necessarily apply to private cloud setups. Private cloud can already be made appropriately secure, robust, and reliable, while offering all the promised benefits of scalability, agility, efficiency, and cost savings. Public cloud will get there one day; private cloud is here now.

“While most banks and their financial services peers are exploring and/or using cloud on some level, many firms are hesitant when it comes to undertaking a full-scale transformation.”


How to move to cloud while managing tolerable levels of risk

Your cloud platform has to be tuned to your unique financial services environment. The challenge is in keeping it open and agnostic to the technologies underlying it.

The race to provide cloud-based solutions is well under way and it has created a lot of confusion in the marketplace. As new suppliers emerge, each with different cloud capabilities, some solutions are not delivered as a single cloud platform but, rather, a collection.

However, the principal misconception about cloud deployment is that it simply requires a containerized SaaS solution that has been tested for different cloud platforms. The software is certainly a key component, but in a trusted and highly regulated sector like financial services, there are significant risks involved if the approach to software deployment and cloud management is not precisely planned and managed.

“Cloud services are here to stay in financial services and the current situation will only accelerate the move. But firms need to be strategic in their adoption and there are important questions that need to be addressed.”

With this in mind, choosing the right SaaS package or cloud platform can be complex. Which is why financial institutions and wealth managers should take the following aspects into account:

  1. Does the platform offer the highest level of security? In essence, can the provider manage security while ensuring compliance with relevant regulatory requirements?

  2. Is the provider fully accountable for end-to-end operation? The provider must be able to offer end-to-end managed services that guarantee high and consistent availability and holistic management across current and future cloud environments.

  3. Does the provider protect you from lock-in? The provider needs to have the provisions to make transition from one cloud platform to another as smooth as possible.

  4. Is the platform open or proprietary? In order to improve agility and avoid product lock-in, financial institutions and wealth managers must choose solutions that use open technologies, and which are aligned with industry standards.

To deliver the benefits financial institutions need without introducing intolerable levels of risk, the cloud platform has to be tuned and managed to match your unique financial services environment. But it must also be kept open and agnostic to the technologies underlying it, and to the technologies it may need to integrate in the future.

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The pathway to cloud adoption

Continuing support of on-premises deployment while clearing the way for cloud migration

At Avaloq, to continue to move forward, we support on-premises deployments but also aim to offer clients an easy path to begin their migration to cloud.

This approach includes two fundamental components. The first has been to re-structure our Avaloq Banking Suite in order to stay ahead of the shift from cloud-enabled technology to cloud-native technology. We created a microservices-based system that uses state-of-the art technology, to allow us to introduce new capabilities such as goal-based wealth management plus ensure that existing functionality can be migrated over time.

The second component is a commitment to creating products that are equivalent across different deployment methods and which are fully cloud agnostic. Take Avaloq Financial Cloud, supporting public, private and hybrid cloud options across core cloud providers; it helps realizing higher levels of automation, which enables businesses to be more agile and quickly scale and re-size their services in response to new demands and client opportunities.

In the future, we expect to see more clients adopting public cloud platforms in a phased approach: starting with non-critical services and development environments before moving on to production environments – provided banking regulations and security compliance requirements have been met.

We have also enhanced the Avaloq Financial Cloud to support hybrid cloud models which will, for example, allow financial institutions, depending on their needs and regulatory constraints, to use public cloud for development and testing work while still using private cloud for production purposes.

If you would like to know more about how Avaloq enable future cloud migration, go to our dedicated pages on SaaS and BPaaS. Or get in touch and let our cloud experts give you the insight you need to start your cloud journey.

“Avaloq’s componentization process is highly granular and its CBS has one of the highest numbers of reusable business services.”

Vittorio D’Orazio

Senior Analyst at Gartner

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