Nationwide Building Society logo on a smartphone screen.

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Robust cloud-based payments systems are seen as a crucial way for incumbent banks to compete more effectively with fintech start-ups. Bill Lumley reports.

The UK’s sixth-largest banking institution, Nationwide Building Society, is following a growing trend with its development of a cloud-based digital payment infrastructure, marking the latest stage of a shift of its digital payments system to the cloud. 

The move follows a series of phases Nationwide launched last year and, in a process expected to complete by the end of summer 2023, it plans to have migrated all types of retail payments from an existing platform without any customer service interruption. To achieve this, the building society has appointed IT consultancy Accenture and cloud payment platform Form3.

Crucially, the switch is seen as a means of addressing competition from technologically more agile challenger banks and is one that other banks are expected to follow, according to Nationwide’s development team.

Otto Benz, payments director at Nationwide, says the move has been driven by the growth in cashless transactions. His organisation processes 450 million payment transactions annually, he explains, and it needs an infrastructure that will evolve as the volume of such transactions grows.

The main consideration of the shift to the cloud concerns resilience, says Mr Benz, particularly after outages in its own payments provision. “With our ageing infrastructure, we’re keen to make sure that the services we provide are resilient,” he says. “Is it resilient enough to manage our current account platform, all the payment flows in and out of that and the subsidiary flows of mortgage business and savings as well, and do we see this as an important part of the wider product space? The answer to that question is yes.”

He adds: “If we can focus our efforts on [providing improvements to our payments services] rather than worrying about the infrastructure, upgrades and end-of-service-life activities, I think that will be a great benefit to us and our members, because we could then focus on the things our members most want.”

Mr Benz adds that there is clearly ongoing debate as to what is the right way for a financial institution to provide its most critical services. “In the UK payments market, the role of regulators, and the Prudential Regulatory Authority in particular, is very important.”

Sulabh Agarwal, global payments lead at Accenture, agrees with the importance of ensuring that the Nationwide cloud payments system is regulation-proof. He cites a number of pending regulatory changes in the UK such as Faster Payments, new ISO standards that are coming with real-time gross settlement and the New Payments Architecture. “What you want is an infrastructure that can easily change, ideally, is lower cost, and does so flexibly and quickly.”

An incumbent vanguard

Mr Agarwal suggests Nationwide will be one of the forerunners adopting cloud-based infrastructure for its core payments and he expects all institutions to move in this direction in the UK and worldwide as this is a space that has been significantly challenged by the fintechs. He says the building society’s move is an example of the way in which incumbent banks will find themselves more able to keep up with the challengers. “All these challenger organisations have been coming up with technology as a core differentiator and the rest of the banking industry is keen to catch up.”

The route proposed by Nationwide to shift payments transactions to the cloud is a common and developing theme, especially with some of Accenture’s larger banking clients, who he says have been looking at how to modernise the backend infrastructure. 

Mr Agarwal says that banks have been modernising their payments infrastructure at different paces. “Some of them went for strategic solutions, where a lot of them went with tactical solutions, which wasn't really overhauling the core infrastructure front to back. I think Nationwide will be one of the forerunners in terms of adopting cloud-based infrastructure for the core payments solution.”

He stresses speed, agility, scalability and robustness are as important as the capabilities of the proposition for the customer. “I would see a lot of institutions following the same path as Nationwide over a period of time,” he predicts. 

The shift of payments infrastructure is a global trend, says Mr Agarwal. Accenture has invested $3bn in its own Cloud First initiative, he says, and has been involved with central bank infrastructures including the Bank of England, the European Central Bank and the UAE.

“They and many others are looking at modern engineering and forward-looking infrastructures which allow them the capability, the resilience and the scalability in future.”


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