Cloud computing doesnt just allow banks and financial institutions to benefit from improved agility and costs savings, it also enables them to move closer to platformification, a model set to govern the banking landscape of the future, Tom Eck, global chief technology officer at IBM said in a conversation with fintech influencer Jim Marous.

During a Banking Transformed podcast hosted by Marous in July, Eck stressed the imperative for banks and financial institutions to embrace cloud technology and truly prepare themselves for the new era in banking.

The cloud allows banks [and any financial institution] to reinvent themselves as platforms, Eck said. A platform to me is when an entity, an institution, a bank, makes its services, plus the services of its ecosystem partners, simple to consume.

Tom Eck

Im a firm believer that the platformification of just about any industry makes sense, and that the cloud is the necessary underlying platform.

Advances in technology, changing consumer behavior, and new regulations aimed at stirring innovation in banking, have led to the rise of fintech. These tech-enabled players are now rapidly gaining ground and setting new standards in usability, championing digital-first customer experience. And with COVID-19 accelerating digital transformation, now is the time for banks and financial institutions to step up their game and rethink their business.

[COVID-19] has made [digitalization] even more imperative, Eck said. I think that the gulf between the haves and have-nots, [when it comes to adopting cloud computing], will really [be determinant of their future success]. Doing nothing has a risk of its own.

With COVID-19 forcing companies to adopt remote working, cloud providers have witnessed significant traction. Just a few weeks ago, Amazon Web Services struck a big new deal with HSBC, and Google announced partnerships with Goldman Sachs and Deutsche Bank.

The pandemic has also accelerated the trend towards digital banking with Dutch group ING stating in July that it would close a quarter of its branches.

For Eck, cloud computing will be the foundation for the ecosystem model, where banks and financial institutions will be required to partner with third-parties to provide a more holistic experience with services that extend beyond financial services.

Citing the example of mortgages, Eck explained the reasoning behind this emerging trend:

Nobody wants to obtain mortgage. People want to buy a house. [A mortgage] is just a necessity, its just one piece of it. They also have to worry about turning on the utilities, getting a moving company, getting insurance, etc.

So imagine if the bank became the hub for all those things, and the consumer would only need to onboard themselves once to the platform. All the know-your-customer (KYC), anti-money laundering/combating the financing of terrorism (AML/CFT) checks would be done once and would be shared securely, with the consumer allowing it to happen It would be a much more fluid user experience.

Banks need to transform from being a financial institution to being [an entity that] offers services. [After all], they are there to serve their clients. And money and the transfer of money [happen to be] behind everything. So lets bring all these things into the mix and make it more convenient.

Although the benefits of cloud computing might be obvious for many, some financial institutions are still reticent in moving some of their businesses onto the cloud.

Banks are in the business of risk management. Moving to a completely new environment, especially public cloud, [gives rise to] many concerns. Some of those threats are real but some are just perceived, Eck said.

There must be education. Regardless of all the technology in the world it still comes down to people. We still need to convince people so that decision-makers understand why if [they] go and move some of [their] sensitive network to [the] cloud, [they] will be able to sleep at night.

Unlike incumbents, which have a deep ingrained legacy culture and which are highly risk averse, for fintech startups, cloud is the obvious choice since the technology allows them to be agile, scale quickly and develop sophisticated solutions for their customers, Spiros Margaris, a venture capitalist and the founder of margaris ventures, said during the podcast.

Cloud is a beautiful offering for those startups to [access and] use cutting-edge technology and be able to scale and become more successful,

Margaris said.

For startups, its very clear that cloud is the way to go. [They] need to build things that make [them] unique. If someone offers something that does it better, why not use it? Thats the whole purpose of these companies: use the best services available to provide [their] customers with a better user experience and better services.

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