Are more Asian banks daring to embrace cloud migrations?

DBS plans to migrate half of its workload by 2018 - will other banks follow suit?

When DBS recently signed an agreement with Amazon Web Services (AWS) to create a hybrid cloud environment, the bank wanted to acquire the same computing advantage that powers the world’s top corporations.

“Amazon, Facebook, Google and Netflix are widely acknowledged as leaders in innovation. What sets them apart is their ability to constantly experiment, automatically scale and rapidly bring new features to market. They are able to do this in part by leveraging the flexibility provided by cloud technology,” says David Gledhill, head of technology and operations at DBS.

DBS says the AWS initiative will enable the bank to deliver new technological applications faster. One of the first use cases is in the bank’s Treasury and Markets (T&M) business, specifically in the pricing and valuation of financial instruments for risk management, and handling short-term surges in trading volumes such as those recently caused by Brexit.

DBS plans to leverage on the cloud for its other business processes, with plans to allocate half of its compute workload to the cloud by 2018 in pursuit of higher cost savings, increased resilience and an improved ability to respond to customer demand.

“AWS gives DBS the flexibility to rapidly scale the capacity of its computing grid up or down, without having to make provisions for permanent overcapacity,” says Gledhill.

Aside from DBS, other Asian banks are starting to get more comfortable with moving to the public cloud despite the security challenges such a shift presents, according to regional analysts.

"Within Singapore, only a few years ago the Monetary Authority of Singapore (MAS) had expressed some concerns regarding the acceptability of cloud services in regard to data security, however in more recent days it has embraced the cloud as a tool for progressive banks to use to create new services and improve the overall competitiveness of banks within Singapore," says James M. O’Neill, senior analyst at Celent.

“DBS is undoubtedly leading the way in leveraging the capabilities of public cloud providers like AWS, however others in Singapore and throughout the region have also began looking at how cloud services can be integrated with their existing IT services strategy,” he adds.

Leveraging on cloud platforms has become appealing because it enables faster deployment, has lower costs compared to large upfront investments, helps with reliability, and is typically easily scalable, reckons Vinayak HV, partner at McKinsey & Company.

"We are seeing banks actively explore opportunities to do more on the cloud, beginning with internal data sharing such as cloud file sharing or storage for internal information. The motivation comes from typical benefits of using cloud platforms such as faster scalability as the amount of data scales up and the varying costs associated with the scale up against investing upfront with a large, fixed capital expenditure, adds Vinayak.

But Vinayak warns that banks will need to manage the trade-offs associated with cloud services such as higher operational expenditure over time and vendor dependence since shifting across cloud providers has not been fully tested. Banks will also have to build up their security standards to pass stringent regulatory banking requirements, which are typically higher compared to other industries.

“The challenge for banks that are considering a move to the cloud is that they need to ensure that they bring on board an adequate number of specialists required to manage what can be the complex details of managing cloud security,” concurs O’Neill.

Even if Asian banks hire third-party cloud service providers, O’Neill says they must still invest in sufficient security measures within the bank, including encryption of all customer data when in transit and when stored. Banks should also mask personally identifiable data where possible and create mechanisms for controlling the access of client data to individuals within the bank.

"In Singapore, banks have an obligation to protect the personal data of their clients under the Personal Data Protection Act of 2012, and as MAS makes clear, the use of cloud services providers like AWS does not release banks from their obligations under PDPA. Under the “dual-responsibility” model of data security adopted by public cloud providers like AWS, the cloud services provider provides secure infrastructure for a bank to utilize, but it is the obligation of the bank itself to secure the non-public personal data of its client within the banking application," adds O'Neill.

In photo: Vinayak HV and James O'Neill