Banks are increasingly moving to hybrid-by-design architectures to improve the interoperability of their observability and monitoring tools and controls.
Risks and vulnerabilities result from siloed cloud and on-premises environments, which is why industry partners such as IBM and Microsoft are working to provide banks with a single pane of glass for all their controls.
Banks that adopted cloud early often had different business lines go into different clouds, each with slightly different control sets, and no way of monitoring them all via a single operation center. Hybrid-by-design architectures offer banks the consistency and automation they need across all environments from the start.
“Some of the banks I spoke to said it costs them millions of dollars to instrument each cloud because of all the security and everything else they need to build in,” says Prakash Pattni, managing director of digital transformation for IBM Cloud for Regulated Industries. “Having solutions like IBM Cloud for Financial Services, which sort of embeds all of that into it from the start, means they can get up and running quicker and at a lower cost.”
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Financial Institutions Are Reimagining Their Operating Models
Many banks expect their cloud costs to double or triple over the next three to four years due to business demands and the infrastructure requirements for artificial intelligence, Pattni says.
U.K. financial regulators have already begun assessing what the impact might be on financial institutions’ payment and mortgage processing if there were a massive outage across the biggest cloud providers. The concern even has U.S. banks improving financial operations and cost optimization by investing in tools such as IBM Apptio.
Hybrid-by-design architectures let banks place their workloads in the cloud or on-premises environment that makes the most sense.
“Nonessential migrations are being paused, while mission-critical systems like risk analytics, fraud detection and customer engagement are increasingly powered by AI and cloud-native architectures,” says Jacqueline O’Flanagan, head of financial services in the Americas at Microsoft. “This is the era of intelligent cloud and intelligent edge, where financial institutions are not just modernizing infrastructure, they’re reimagining their operating models.”
Microsoft Cloud for Financial Services aims to meet banks’ regulatory, security and compliance needs, while Azure Cost Management and Azure Advisor provide deeper visibility into cloud spending, workload placement and resource allocation. Then there’s Azure Arc, which unifies bank operations across infrastructures.
“During transaction surges or intensive risk modeling, banks running both in the cloud and on-premises can seamlessly extend workloads into the cloud without straining internal systems,” O’Flanagan says. “And with elastic provisioning, they avoid large upfront infrastructure costs, paying only for the resources they use.”
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Custom Security Controls and Cyber Resilience
Different bank data requires different levels of security and controls depending on whether personally identifiable information and financial records are involved. IBM created its Financial Services Cloud Council and had banks share their control sets, embedding those into its cloud, and now it’s finding the public sector needs them as well.
“What we're seeing in a hybrid world is banks are keeping the more sensitive data on-premises or in a private cloud,” Pattni says. “They're putting the less sensitive data on the public cloud.”
A perk of the cloud is that its more advanced security tooling improves threat detection, and controls can be customized to limit access to different data environments in accordance with zero-trust security.
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A major cyberattack on Marks & Spencer rendered the U.K.-based retailer inoperable for about two months, which could cost financial institutions hundreds of millions of dollars. For this reason, IBM is also working with a number of banks to develop digital twins.
“They'll create the equivalent structure on multiple clouds, and if something happens to one environment, they're able to move all their processing to another environment on-prem, on another cloud, giving them this resiliency,” Pattni says. “Therefore, they don't have this downtime in business.”
