Banks’ march to the cloud has been at a relatively slow pace compared to other industries, with many banks shifting in stages from on-premise mainframes to private cloud, and then to hybrid cloud (a mix of private and public cloud). However, until now few institutions have made that final leap to moving all their IT operations to a public cloud environment, which sits completely outside the bank perimeter.
Yet, incumbents are striving to become ‘cloud-first’ organisations, due to the automation, scalability, flexibility, resiliency, increased speed to market and lower cost that cloud technology can deliver. According to EY, 69% of UK banks it surveyed see cost optimisation as a core business objective of public cloud, while 54% pick innovation, 46% select managing resilience, and the same percentage say speed to market.
But along the way banks have had to overcome many barriers, including concerns around security, control and vendor lock-in, as well as re-engineering their existing processes to be cloud-ready. The early movers found that a simple ‘lift and shift’ strategy would not provide the benefits that a cloud environment promises.
Other barriers remain live issues, including data sovereignty and authorities’ divergent regulatory attitudes. For example, in a September 2020 interview with The Banker, Ara Abrahamyan, chief digital transformation officer of Erste Group Bank, identified the different regulatory approaches to public cloud as a challenge to creating a seamless and uniform digital experience across multiple countries.
Banks have had to overcome many barriers, including concerns around security, control and vendor lock-in, as well as re-engineering their existing processes to be cloud-ready
Many believe that European banks are lagging behind US and many Asian counterparts in terms of public cloud adoption, mainly due to this fragmented regulatory environment and a lack of major European cloud providers. The latter issue propelled France and Germany’s finance ministries to launch a joint effort in late 2019 to build an independent cloud infrastructure to rival the cloud giants such as Alibaba Cloud, Microsoft Azure and Amazon Web Services. However, this is yet to fully materialise.
Now European financial institutions are coming together to drive forward public cloud adoption in a safe, secure and controlled manner. More than a dozen institutions have jointly launched the European Cloud User Coalition (ECUC), which aims to “strengthen the public cloud ecosystem for the entire European financial industry”.
The ECUC’s objective is to identify common challenges and develop a joint position on solutions, standards and best practices with cloud services providers. It’s first step will be to publish a paper with requirements for cloud services during 2021, including considering the European regulatory and data protection standards. This is an opportunity for the banks to use their combined strength to impose specific requirements on non-European cloud players.
This is also great opportunity for the ECUC to lobby the different authorities across Europe to develop a standard approach to public cloud. Because until the regulatory framework is addressed, banks will not be able to fully take advantage of a public cloud infrastructure to improve their agility and resilience, as well as strip out costs.
But it will take a mammoth effort and the full commitment of current ECUC members and prospective members to achieve that alignment. The initial kick-off has been less than inspiring, with its website still under development and only about half of the named banks publishing the announcement on their websites. (ING is the standout bank among its peers, adding enthusiasm to the standard press release.) Now is the time to get behind the European financial services public cloud initiative, or risk letting it falter at the first hurdle.
Joy Macknight is managing editor of The Banker. Follow her on Twitter @joymacknight
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