(Toronto) The big Canadian banks are changing.
Faced with growing competition from start-ups, growing customer expectations and increasing digital demand, banks are accelerating their move to the cloud.
The trend had started before the pandemic, but the sudden closure of branches and offices in March 2020 forced banks to rely even more on online systems, according to Robert Vokes, general manager of Canadian financial services at the firm Accenture. .
“In March 2020, everyone suddenly realized they needed faster service. It was a serious warning, ”he says.
Cloud-based systems, sometimes managed by banks, but more often by third-party tech companies, allow data to flow faster and more freely. Banks can more easily characterize each customer, automate even more and save money.
The idea has been around since the internet bubble, but the equipment has only been able to make it happen for a few years, Vokes adds.
“We did not have the technical means, but the technology has caught up. ”
Several banks have entered into agreements with companies offering cloud services in recent months. For example, CIBC signed a contract with Microsoft Azure, Scotia with Google Cloud and BMO with Amazon Web Services.
BMO has just completed a first major transformation of its system since its agreement with Amazon by transferring all of its financial activities to the cloud, an operation that required transferring the equivalent of a thousand data servers.
The bank decided to go ahead because it is now convinced that the cloud infrastructure is well established and reliable, says Sid Deloatch of BMO.
“We have reached the threshold. We felt the technology existed. We are convinced that it exists now. This is why we are moving forward, ”he said.
The transformation will allow BMO to offer automated decisions on loans. It will be able to save up to 30% on its operating costs.
According to Sanjay Pathak of the firm PwC, banks were reluctant to take the plunge because of the large number of files accumulated on older systems over the past decades.
“Untangling day-to-day activities from old techniques is very, very complex. It can be very risky and disrupt a business, ”he says.
Convincing management has been a very difficult task, because the switch to cloud computing means relinquishing control over infrastructures that have been in place for several decades. However, banks can no longer fall behind in this area because of pressure from their customers and the expectations of their employees who want more homogeneous procedures, says Pathak.
The smaller banks were able to act faster. EQ Bank was thus able to convert to cloud computing in 2019. Young financial start-ups could start their activities directly on the cloud, forcing banks to react.
“There is a lot of pressure being placed on financial services by financial technology companies. These have often seen the light of day on the cloud. They can move very quickly because of their full digital capacity, ”says Hillery Hunter of IBM Cloud.
According to her, several banks are moving their basic systems to the cloud because so much of their data needs to be integrated. This data must be readily available in order to make certain decisions on the spot, in particular for loans.
“Consumers have become quite impatient. They expect things to be available immediately. ”
Worries
However, the use of a third party to store personal financial data raises concerns among some regulators.
The Bank of England said in October that measures are needed to “minimize the risks to financial stability created by the concentration of services provided by a third party”.
The Office of the Superintendent of Financial Institutions Canada released a draft guideline earlier this month on managing technology and cyber risk. He said banks and other financial institutions should plan smart exit strategies and consider the portability of data from one cloud service provider to another.
The Bureau plans to publish guidelines specifically targeting third-party companies in early 2022.
Data security and ensuring that high-tech companies don’t have too much power to dictate their terms are the main concerns, says Pathak. These companies have the size and the speed to become a threat, he says.
“The tension is growing. Cloud providers are becoming competitors. They are a real threat to the banks. ”