How the cloud is the path to open banking

Two years ago, as the UK’s first initiative on open banking was coming into force, Imran Gulamhuseinwala made a prediction to the BBC. “It is difficult to overstate just how revolutionary open banking could, and should, be. New products will emerge from incumbents and entirely new entrants will join the market”, he said. Imran, who is a trustee at the organisation overseeing open banking wasn’t alone, many others predicted it would bring nothing short of a revolution to banking.

Now is the right time to see how to take better advantage of the open banking framework.

One pandemic and two years later, we have seen unprecedented levels of upheaval in the banking industry. There has been dramatic change, with innovation coming from players both old and new. But with banks re-evaluating their customer relationships and product offerings as a result of COVID-19, now is the right time to see how to take better advantage of the open banking framework.

Open banking defies one of the core principles of banking – that customer information should be zealously protected as a value asset. It opens long-closed “vaults” to critical pieces of systems and data to participate in open and collaborative ecosystems. The value derived from open banking is in collaboration, where customers and banks can gain more insight by safely and securely sharing customer transaction data with third-party stakeholders.

Customers can receive personalised recommendations on retail account providers based on real-time data-based insights. Banks, small and large, receive a new source of leads generated by matching customer needs to product offerings. Limited open banking initiatives are already in progress, but there is so much more to do. Banks must consume, cache and share an even greater volume of data – and for a wider range of purposes – than has ever before been necessary or feasible. This data must be processed and analysed at scale, in real time.

How is this possible? Enter the cloud.

Decentralised, scalable systems are the only feasible way for banks to fully capitalise on the enormous opportunity presented by open banking. Here are the four reasons why the cloud can act as an accelerant for development.

1. Scope, flexibility and speed

Open banking success is inextricably linked with the capacity to process large volumes of data in real-time. To deliver a genuinely bespoke experience, banks need to absorb and process immense volumes of data from a myriad of different sources. Source locations will only increase as open banking becomes more commonplace in the UK market, so banks must be ready to manage, harvest and manipulate an exponentially increasing amount of data. Cloud solutions offer true elasticity to accommodate volume fluctuations and facilitate real-time processing, which is already a must-have for most banks around the world.

2. A modern home for modern technology

Having access to vast volumes of data in great reservoirs is pointless unless banks have the capacity, expertise and methods to harvest it for good use. Most customer data is unstructured and requires modern technologies – such as artificial intelligence (AI) and machine learning (ML) – to analyse it effectively. A modern cloud computing environment removes the unnecessary risk, expense, and overhead required to run hardware on premises; the cloud offers an ideal place to organise big data and can also be used as an operational test environment for developers to innovate securely.

3. Safety and security

Regulators, industry bodies and private corporations acknowledge that the cloud not only offers exceptional flexibility and speed but is also a safe and secure environment for personal, private and even secret data. Actions often say more than words, and we can see first-hand successful international enterprises routinely storing colossal amounts of data securely online without hitch.

4. A new model for new times

Using microservices and continuous development models empowers banks to break away from their monolithic technology stacks towards agile operating systems. These represent the building blocks of a truly digital bank and offer a starting platform for redefining what’s possible in banking.

With mounting evidence and customer demand, we are confident that the development of open banking in the UK will gain momentum in the next two years.