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New cloud-based business architectures in banking and financial markets


2021年4月21日

At the beginning of the year, the IBM Institute for Business Value (IBV) invited 44 IBM global experts—members of the Industry Academy and Academy of Technology—to reflect on key trends driving actions and investments across the industry in 2021. We identified the following top themes that will likely dominate and push banking and financial markets leaders to act:

From the perspective of embracing new business architectures, three essential preconditions emerge for banks to transform swiftly, securely, and efficiently:

  • Leveraging and protecting proprietary data
  • Augmenting in-house development with ecosystem partners
  • Automating and integrating front and back-office functions.

To support business-critical digital transformation, most banking organizations are committed to a cloud strategy, and are well aware of the flexibility, agility, integration, and scalability benefits of an open hybrid multicloud approach. First movers already recognize that existing architectures simply cannot deliver the cost and agility required to compete in a disrupted landscape and feel impeded to deliver returns demanded by investors.

In our experience, financial institutions seeking higher expected returns would target 40-50% of workloads on specific public cloud, 20% on traditional public cloud, and the remaining 30-40% on-premises based on a modern mainframe infrastructure. This hybrid multicloud strategy would enable banks to leverage cloud native, API-driven banking functionality to easily and quickly source added-value capabilities from banking and non-banking ecosystems.

“Open hybrid multicloud is a foundational environment enabling effective digital transformation that integrates traditional computing platforms with private, public, and managed cloud platform services. In essence, a hybrid cloud becomes a virtual computing environment spanning multiple landing zones that aligns workloads and digital interfaces with the most appropriate computing platform. All these services need to be managed as though they were designed to behave as a single unified environment.”

definition of open hybrid multicloud

Migrating to a new business architecture

How does open hybrid multicloud add value? Yesterday’s banking architectures are illustrated below as a pyramid with most of the costs pooling at the bottom, such as core banking (see Figure). However, key revenue generation mechanisms are serviced at the top, such as intermediation with customers and relationship management.

Winning on digital economies requires an inversion of the pyramid, making core banking a utility that scales efficiently with intelligent workflows, matching each workload to the most effective computing platform (open, hybrid, multi), and expand the investments and capabilities supporting the next generation of customer experiences. The path to open hybrid multicloud is clear.

Journey to open hybrid cloud architecture: Business outcomes include agile, digitally transformed operations.

Journey to open hybrid cloud architecture: Business outcomes include agile, digitally transformed operations.

Optimize banks’ business critical workloads on specific public cloud

Today, less than 10% of application workloads have migrated to public cloud computer platforms, with the remainder in on-premises platforms. Clearly, a public cloud alone may not necessarily be the optimal environment for hosting all mission critical application workloads.

As banks started adopting cloud platforms, they learned the importance to access industry-specific attributes about security and compliance requirements that only an open hybrid multicloud framework would facilitate. Banks recognized the need to match the complexities of their operations and multi-faceted regulatory demands with the right cloud platform. More advanced institutions are not stalled anymore. They are honing their cloud migration strategy to new business operating models that only an open hybrid multicloud architecture can address.

Business leaders and regulators understand the inherent risks of relying on a single vendor for all situations. It makes sense to operate with more than one provider to mitigate risks of operational resiliency, the risks of de-platforming by platform providers, and to enhance data security.

There are mission-critical workloads leveraging strategic datasets that businesses are not eager to place on the public cloud. Therefore, well-informed decision makers demand to be supported by a business architecture that combines a variety of public and private clouds, hosted services, edge computing, and data center capabilities from a number of different vendors.

Rewire for agility and scale with the right moves

Financial institutions do not just need to restructure operations, cut costs, and simply survive. They need to win with new business architectures enabling expansion and reclaim market leadership. This is dependent on making the right moves by blending business and IT priorities toward a more collaborative operating model supporting agility, mobility, and resiliency. This collaborative operating model is underpinned by 5 enablers and ways of working:

  • Next-generation operating models. The business of banking demands high levels of efficiency and openness. Adoption, deployment, and evolution of new operating models—including architecture, technology, processes, people, partnership models, and even culture—are needed to support new and disruptive business models and prepare banks to succeed in an ever-changing environment.
  • Agility. Business agility is a core capability to generate ideas, realize meaningful experiences through intelligent processes, and operationalize to rapidly deliver business outcomes. Avoiding vendor lock-in with strategic optionality on an open hybrid multicloud platform is a must have to compete.
  • Secure container technology. Workloads can be moved across competing environments allowing banks to use multiple cloud providers as back-up, switching in case of disruption. Full portability with security embedded into the container pipeline is reliable technology; it is compliant, scalable, and trusted for defense of the infrastructure.
  • DevSecOps for compliance. Developers can leverage the strengths of both security compliance teams and DevOps teams, yielding a process that works better for both. A solid DevSecOps solution embeds compliance best practices, policies, and tools into each phase of the development lifecycle.
  • Site reliability engineering (SRE). Enable and empower a SRE discipline to focus on how to scale and maintain uptime in a distributed environment and minimize outages. Implement SRE to offer consistent service level support, logging, management, and delivery across cloud environment with intelligent automation and real-time alerts for responsive operations.

Engage with the ecosystem and take advantage of industry scale

New operating models are just one step to change the way of working within a bank. The next step is about engaging with ecosystem players (including independent software vendors, other financial institutions, other industries) through industry-wide secured solutions to take advantage of industry scale.

As banks migrate business critical workloads to an open cloud environment, they can couple application modernization with the sharing of business-critical capabilities. Speed can be achieved by identifying a valuable ecosystem of partners to leverage and shorten time to market, or by forming coalitions to create an industry utility. For example:

  • Business critical banking partnerships. The five largest Nordic banks founded a know your customer (KYC) utility named Invidem to be commercially launched in 2021. The digital platform manages and administers public KYC information to prevent money laundering and terrorist financing. This type of partnership delivers increased security through enhanced KYC capabilities, identity validation, and fraud detection by identifying unusual patterns in payments traffic that individual banks cannot identify.
  • Rise of information banks. Satellite broadcaster Sky Perfect JSAT Holdings and personal loan provider J. Score gives customers more control over their personal account data and offers a transparent solution to compensate customers for the provision of data. Banks striking data-sharing deals with businesses like J. Score can simplify credit extension and glean insights at the “moment of decision,” and arrive at more precise risk-scoring and credit-underwriting decisions.

Getting ready for open hybrid multicloud

An organization has decisions to make about which workloads to prioritize for public cloud, which ones to prioritize for private cloud, and which to leave on a more traditional enterprise platform. They also need to separate what can be done—in terms of ease and feasibility—from what should be done from a strategic standpoint.

A robust multi-criteria framework can help determine the optimal platform for each workload. Both operational and business criteria should be considered in each workload evaluation: resiliency; responsiveness; digital maturity; risk, security, and compliance; and business case application.

Here are the key steps to develop a strategy to determine your optimal platform:

  • Consider a “big picture” view of the industry specifics and complexities related to a large-scale migration to alternative cloud environments
  • Evaluate approaches and build a business case that considers criteria that matters—completeness and depth of platform; hybrid and multicloud interoperability; total cost of owners/lifecycle economics; operating model; and experience, ecosystem and partnerships—to substantiate the business case with an ROI estimate
  • Determine which workloads to prioritize for public cloud, which ones to prioritize for private cloud, and which to leave on a more traditional platform
  • Build “islands of stability” on the journey to cloud that have value—and avoid technical debt—and continue to build and evolve a cloud environment suited to the business of banking.

Part of the appeal of an open hybrid multicloud approach is the resulting flexibility, agility, and ability to scale. And because one size does not fit all, open hybrid multicloud can enable a bank to embrace cloud services without restricting it to a single technical solution platform or provider. To be successful, businesses that focus on a hybrid cloud and open-source plan are in the position to grow their business and protect their customers.

To learn more about key actions for banks migrating to cloud, please download the IBV report “Banking on open hybrid multicloud.”


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Meet the author

John J Duigenan

John J Duigenan
General Manager, Financial Services, Banking, Financial Markets, and Insurance Global Industries, IBM Technology


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