A Short History Of Financial Services In The Cloud
I’ve been working with a long list of financial services companies from various subsectors on their cloud strategies. Each wants to know how to best take advantage of cloud while meeting stringent (and shifting) regulatory requirements. It’s been a long road for financial services and cloud. Here’s a little bit of history.
Financial services have always heavily invested in technology, but in the early days of cloud, this was almost exclusively directed at private cloud implementations, with the exception of unique modeling/scalability requirements. Over the years, most banks continued with their allegiance to private cloud. Bank of America was one of the staunchest proponents and holdouts for private cloud. In 2014, Bank of America then-CTO David Reilly stated, “When we benchmark the price points in the public cloud against what we’re able to provide internally … the economic delta’s just not there yet. There’s no economic reason for us to move to public cloud.” This sentiment was largely matched across the financial services sector.
But in 2015, Capital One shocked the world with its pronouncement of going all in on Amazon Web Services (AWS) and even migrating existing applications — an unheard-of notion for any company across any industry. Capital One claimed that AWS could better secure its workloads than Capital One’s highly qualified security staff. Following this announcement, an onslaught of digital-native banks followed suit. Notably, Tieto in the Nordics offered the industry’s first financial services-focused cloud, with a concentration on ready-made digital banking services.
In 2020, IBM made waves in the market by announcing its IBM Cloud for Financial Services alongside the hiring of the former CTO of Bank of America, Howard Boville. IBM’s plan was to build a hybrid offering that served the unique needs of the financial services market. Quickly following its lead were a series of strategic partnership announcements: Goldman Sachs and Nasdaq with AWS, CME Group and Google Cloud, Westpac and the London Stock Exchange with Microsoft, and so on. Other banks followed suit with migration moves. BBVA announced a partnership with Google Cloud and the migration of its investment banking platform to AWS. State Street turned to AWS for data center replacement and Azure for business app development. And the list continues. Today, it’s hard to find a financial services company not making major moves with public cloud. Similarly, most cloud providers are building out industry-specific capabilities for this profitable industry.
I recently wrote a best practices report with my colleague Meng Liu that informs financial services companies about how leaders are approaching cloud with the particular needs of their industry in mind. If you’ve been following along, I’ve worked with colleagues who specialize in other verticals in retail and healthcare. We’ll follow these best practices reports with a “State Of” series. A second “State Of Cloud In Financial Services” report will follow shortly. In these reports, I talk about regulation, high availability, the challenges faced by subsectors in the industry, and the current maturity of industry clouds. Enjoy!