Westpac’s move to implement a hybrid cloud platform highlights a tipping point for the industry as the sector confronts cost pressures as well as further regulation particularly around data and privacy.
This is the assessment of IBM general manager, global banking and financial markets Likhit Wagle who adds that banks now have to balance cost pressures with the need to innovate.
Last month, Westpac announced that it implemented an offsite private cloud environment as part of its fully integrated (public) cloud platform strategy.
The hybrid platform built and is operated by IBM, allows the bank to deliver new customer solutions to market faster, while meeting regulatory controls for data protection and privacy.
In a press statement, Westpac Group’s CIO, Dave Curran said the shift to hybrid cloud brings a unified agile platform that will reduce complexity, inefficiencies and cost while ensuring the bank responds to customer needs rapidly.
“We’ve seen a massive reduction in the time it takes to set-up and host applications with a 40 per cent saving in set-up costs from start to deployment of an application.
What historically took weeks is now automated and happens in hours. For example, service provisioning has gone from two to four months to two to four hours and application installation will be reduced from months to hours,” Curran said.
IBM’s Wagle said Westpac’s approach has enabled the bank to leapfrog legacy issues by modernising its applications and systems rather than replacing a core system and believes this approach will signal wider adoption by other banks.
With the budget pressures of today, it is no longer possible to go down the route taken by the Commonwealth Bank – which began a major banking upgrade in 2008. He cites Barclays Bank and Lloyds Bank as examples of banks who have adopted a similar approach to Westpac.
Barclays Bank overhauled the digital front office of its retail business by shifting its core bank to a ledger, using additional layers like APIs and micro servers to “create a genuine services architecture model”.
Similarly to Westpac, the banks were able to achieve faster automation for its processes without “having to make massive changes to its core banking”. Lloyds Bank also adopted a hybrid platform not too dissimilar to Westpac.
“Lloyds is the largest bank in the UK, with 40 per cent of the UK GDP goes through Lloyds’ payments system. The numbers are confidential, but they have managed to achieve cost reductions. “Banks need to work to 15 to 18-month timeframes not three years. Budgets are now tighter,” Wagle said.
For the IBM executive the approach by banks like Westpac, Barclays and Lloyds means technology transformation can be undertaken through a “bite size” rather than CBA’s “heart and lung” approach.
Wagle also acknowledged growing regulation around data and privacy issues and how a hybrid platform – that is the combination of a private and public cloud can effectively manage issues around data sensitivity.
“For highly regulated industries like banking, a public/private cloud platform will deliver better customer solutions while meeting those regulatory obligations.”