Reimagining Multicloud Orchestration for Banks

In a highly regulated industry like banking, innovation always existed within silos bounded by strict regulations.

The risks were just too high to think beyond. Besides exorbitant fines and a loss of operating licenses, banks faced reputational risk. Trust, after all, is what banks trade in. Else, customers will simply switch to a more trustworthy bank.

So, what happens when the same regulators who wrote these regulations pivot and become disruptors and change agents? It levels the playing field and erodes the marketshare traditional banks enjoyed. 

The oncoming innovation wars

Banks never shied away from innovation. In fact, they were leaders in using technology to provide new services, drive efficiency and integrate global processes. Over the past decade, they also started sharing data for better compliance, customer relationship management, and improving risks.

So, why are traditional banks not seen as innovators? The reason lies in that all the innovation occurred in narrow silos, often defined by regulations and products. The challenges that face holistic wealth management and combining investment and protection advice offer some examples.

However, their most significant advantage lies in their customer relationships based on data collated over the years. The fact that many banks are pursuing master data management projects signifies that they understand the value in achieving a holistic view of the customers through their data.

However, regulators' moves to drive open banking and open data initiatives, and encouraging neo banks to launch, meant banks needed to increase their time-to-market. Where the data resides then becomes essential.

“One issue is the data is sitting with the application. The other issue is that the same data may be sitting across multiple applications. So, they will need to build a secure data architecture,” Aju Murjani, public cloud executive for sales at IBM Asia Pacific, explains.

This is a big challenge for banks that traditionally operated along product lines. This siloed approach saw data duplication and inconsistent data structures across the organization. “When I used to do some work with a reputable bank in the Philippines, they recorded a customer’s ID 97 times in their systems,” Murjani observes.

This creates challenges that go beyond data efficiency and the inability to create golden records. Murjani notes that it impacts identity management and data security, which can cause further headaches for the IT and security teams in a Zero Trust world.

The lack of proper data mobility means leveraging the cloud can be a challenge. Although many banks are in the cloud, they remain within private cloud domains, observed Murjani.

“If you don't get [your data] into a lake, modernize it, and secure it, then the next [step] you take either on public, private or even a distributed cloud environment will basically evolve to a state of garbage in, garbage out,” he adds. 

Banks cannot afford to wait either, with neo banks and Big Tech nipping at their heels and eroding their market share.

Understanding IBM Cloud Satellite advantage

For banks, moving to a single cloud is not an option.

First, their internal IT landscape is typically a patchwork of SaaS applications and interdepartmental cloud applications. Also, for many regional and international banks, compliance and data residency rules mean they must operate across different cloud data centers. And not all hyperscalers can offer a single, global solution, and neither should banks consider if they are afraid of vendor lock-in.

Murjani also notes that banks now manage hybrid workforces and want to move data closer to their analysts or critical operations. It is a major theme among hyperscalers to run workloads from Edge-to-Cloud, where part of the data is stored in a cloud data center closer to the user or where the data is generated like a micro data center.

At the same time, banks are beginning to see the economic promise of the cloud disappear. Increasing data egress and ingress charges mean becoming a cloud-only bank is no longer viable at a time when traditional banks are facing return-on-equity (RoE) pressures. It is one reason why some banks see the value of keeping or even shifting back some of the data on premises.

The problem with working with multicloud, on premises, and edge clouds is that orchestration is complex. And with regulatory scrutiny on data privacy increasing and banks facing more sanction-related pressures (e.g., identifying new PEPs), they are also undertaking much more risk. There is also the ugly truth that not all cloud workloads are designed to be portable, adding another layer of complexity.

“So, it comes as no surprise that IBM Cloud Satellite is getting a lot of attention. In fact, I’ve never seen so much interest in a single cloud solution,” claims Murjani.

Why? One reason is that IBM Cloud Satellite, which runs on Red Hat OpenShift, offers a solution that all multicloud-driven banks are asking for. It is an extension of the IBM Public Cloud that runs inside a customer’s data center or right at the edge. IBM has also ported all the cloud services on Kubernetes, so it is multicloud orchestration-ready.

The solution’s key benefit lies in its name. Each Satellite control plane is an instance of IBM public cloud running on Red Hat Enterprise Linux or an IBM Cloud Pak System. Think of it as a self-contained turnkey private cloud prepackaged offering. Every Cloud Satellite location is connected using IBM Cloud Satellite Link, managed by the IBM Cloud control plane. This allows immediate audit and visibility to the users while allowing cloud ops teams to configure easily.

IBM is also collaborating with over 65 partners, including Cisco, Dell, and Intel, to run workloads on different environments. Customers can also access Red Hat Marketplace’s massive list of offerings.

Use cases expand

The flexibility of IBM Cloud Satellite is now offering new use cases.

Murjani pointed to teller-less banking or robo branches. These are becoming popular as branch use plummets, and banks are hard-pressed to close them for health and safety reasons.

“These are brick & mortar locations without any tellers on site, but the capability to scan check deposits, authenticate PINs with a driver's license, and on-the-spot replacement of lost ATM cards,” explains Murjani.

He notes how a bank using IBM Cloud Satellite implemented an architecture that supported microservices on a serverless framework.

“This allows for instantaneous scale, simplified maintenance, and efficiency in rolling out of new capabilities; all with the compliance measures needed,” he adds.

Another use case is fraud detection using AI. Murjani noted that the bank needed the AI-based tools local to be locally deployed for lowering latency and increasing speeds for threat detection and claims processing. IBM Cloud Satellite can enable such an architecture while offloading local maintenance needs and deploying AI-based apps within three to five weeks. 

The journey is just beginning

Murjani sees new cases will follow, and the solution's flexibility allows for ones that his team has not even thought of.

“It is not just about saying we've got an industry cloud for financial services institutions. Rather, we've got an industry platform for financial institutions to partner with us. This is not just another marketing gig, and now we are looking at new use cases nearly every day,” he adds.

The journey for IBM Cloud Satellite is only starting, Murjani notes. Over time, he sees the offering extending to other cloud platforms while allowing industries to create specific industry-driven clouds.

“We are only limited by our creativity now,” he adds.

Winston Thomas is the editor-in-chief of CDOTrends, HR&DigitalTrends and DataOpsTrends. He is always curious about all things digital, including new digital business models, the widening impact of AI/ML, unproven singularity theories, proven data science success stories, lurking cybersecurity dangers, and reimagining the digital experience. You can reach him at [email protected].

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