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Fair weather or not, the cloud is coming

The use of cloud computing in banking rumbles ahead, albeit somewhat overshadowed by flashier news of other technologies, such as mobile payments, Big Data, customer relationship management, and others.

Doing business in the cloud increasingly makes sense to lots of banks and other businesses. For business in general, Gartner says more than 60% of the respondents in its recent survey will increase their budget in cloud-related investments within the next two years.

"As economic pressures increase and other factors come into play, such as resource limits and skill shortages, organizations have expressed overwhelming interest in cloud computing and other options that externalize IT," Gartner says.

Earlier this year, in an extensive report, Accenture predicted that clouding computing will "shake up the banking industry" by: Leveraging social and mobile media to transform customer experiences and relationships; dominating core banking in private clouds; and dominating noncore and nondifferentiated banking activities in public clouds.

Such a disruptive technology can't remain below scrutiny for long. Just recently, TeamQuest, which specializes in IT service optimization, found that 40% of IT managers admit having experienced a cloud outage at some point.

"With nearly one third of respondents spending $1 million or more on cloud services annually, unplanned outages in the 40% range won't be tolerated by business leaders or their customers," says Scott Adams, director of product management.

Such is the impact of the cloud, however, that such news, rather than giving pause to adopting the technology, seems only to be spurring more research and more interest in improving cloud uptime and increased use.

"Cloud, whether it's internal or external, is here to stay and it has great benefits, but IT managers need to know whether there is sufficient service capacity to support growth or peaks in their workloads," Adams says. "The IT team must play a larger role with the emergence of today's dynamic environment. You have to ask the right questions and provide expertise and advice to a variety of constituents to mitigate risks."

In other words, a tech expert should be at the table when the operations and product and services people propose adding on new requirements that they hope will be supported by cloud services.

That's also essentially what the Federal Financial Institutions Examination Council says in its guidance on "Outsourced Cloud Computing," issued last summer. Of course, this guidance includes many more factors than just the business issues.

In its conclusion, it says "When evaluating the feasibility of outsourcing to a cloud-computing service provider, it is important to look beyond potential benefits and to perform a thorough due diligence and risk assessment of elements specific to that service. Vendor management, information security, audits, legal and regulatory compliance, and business continuity planning are key elements of sound risk management and risk mitigation controls for cloud computing."

When you look at its potential, cloud banking is anything but mundane, even though it hasn't grabbed a lot of headlines. Back to Accenture, which predicts that cloud banking will:

 Redefine customer relationships.

 Progress steadily at all levels of implementation.

 See pressure from nonbanking cloud-based competitors.

Offer collaborative cloud-based shared services between banks.

Expand cloud-enabled collaborative bundling beyond financial services.

 Have payments in the cloud become a key focus.

Such possibilities are becoming realities as third-party vendors get into the act. For example, ABA's Corporation for American Banking endorses these cloud-based services:

 Office equipment and document solutions, Xerox Corp.-Recently Xerox introduced ConnectKey, which is embedded in its multifunction printers, including the ability to scan and upload documents to cloud repositories.

Online audit confirmation and credit inquiry services, an online, in-the-cloud solution, this service simplifies audit confirmation and credit inquiry requests.

 Network security and data protection resources, Trustwave-Protects network, applications, and sensitive data with in-the-cloud managed solutions.

In addition, ABA's Business Solutions works with these cloud-related vendors:

 Aklero Risk Analytics, which uses Software-as-a-Service to measure mortgage risk and quality of loan production.

Mortgagebot, which, among other things, enables self-serve, online borrowers to complete mortgage applications.

[Note: The above may not be a complete list of all endorsed or associated providers that are involved with cloud-related services. Please check both the CAB and Business Solutions websites on for more information.]

Of course, this vendor field is getting more and more crowded. Just within the past few weeks have come these announcements: SAP offers a cloud platform for banks to build loosely coupled applications that integrate with their traditionally configured solutions; Tribeca Cloud provides for intranets and business platforms; and defi SOLUTIONS has a cloud-based loan origination system.

So, the cloud really is rumbling, but it is colliding with the need for due diligence and regulatory caution, as FFIEC notes. The CAB and Business Solutions partners already have had strong due diligence scrutiny that banks can rely on, but, of course, third-party responsibility remains with individual bank management on a case-by-case basis.

Along those lines, one way to beef up the confidence of a bank's board and executive team is to attend industry conferences. ABA will offer a session called "Managing the Cloud" at its ABA Risk Management Forum, coming up April 24-26, in Baltimore.

It promises to provide easy-to-understand information about types of clouds, associated risks, and how to enhance vendor due diligence and risk management programs.

This same session will be held again at the ABA Regulatory Compliance Conference, June 9-12, in Chicago. (Consult sites for both conferences below.)

It's safe to say that cloud banking will shift from the back burner to the front, sooner than later, and it's imperative to understand what it is all about.


Sources used for this article include:

ABA Risk Management Forum

April 24 - 26, 2013 Baltimore Marriott Waterfront Hotel Baltimore, MD

2D: Managing the Cloud

ABA Regulatory Compliance Conference

June 9-12, 2013 Hyatt Regency Chicago Chicago, IL

Managing the Cloud

Cloud computing changes the game

Aklero Risk Analytics

Online Audit Confirmation and Credit Inquiry

New defi SOLUTIONS Loan Origination System Reduces Time, Creates New Opportunities for Lenders with Mobile Application Feature

Outsourced Cloud Computing

Tribeca Cloud Launches Turnkey Solution for Deploying Open Source Platforms in the Cloud

Gartner Says Cloud and CRM Will Drive Enterprise Software Spending in 2013 and 2014

inContact Expands Cloud Platform With Powerful New Mobile Capabilities


Close to Reality-Confidence in SAP's Cloud Solution

40% of IT Managers Experience Cloud Outage

Network Security and Data Protection Resources

Creating a Simpler, Secure Workflow: Xerox Technology Supports Cloud Services, Custom Apps, BYOD and More 

John Ginovsky

John Ginovsky is a contributing editor of Banking Exchange and editor of the publication’s Tech Exchange e-newsletter. For more than two decades he’s written about the commercial banking industry, specializing in its technological side and how it relates to the actual business of banking. In addition to his weekly blogs—"Making Sense of It All"—he contributes fresh, original stories to each Tech Exchange issue based on personal interviews or exclusive contributed pieces. He previously was senior editor for Community Banker magazine (which merged into ABA Banking Journal) and for ABA Banking Journal and was managing editor and staff reporter for ABA’s Bankers News. Email him at [email protected].

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