Cloud computing allows banks to keep their infrastructure costs relatively fixed, while also providing them the ability to grow and scale their applications as necessary. It provides virtually limitless computing capacity, so that capacity is never an issue as the bank expands. The cloud also allows banks to deploy new products and services faster. Acquiring a server and deploying locally hosted software can take two or three months, whereas a cloud-based solution can be deployed in a matter of weeks, or sometimes even days. Cloud computing can be especially attractive to larger national and international banks. This is because cloud-based applications are easier to deploy to geographically diverse locations. Ideally, a bank would have two tiers of cloud-based infrastructure. The first is a private cloud, where the bank owns and controls the cloud. This private cloud is used for many of the most common applications and is typically built on a VMware platform. This lets the bank provision the cloud internally. Marketing middleware and user interaction pieces, on the other hand, are generally hosted in the public cloud.
“Wearables will further enable banks to make product offers to customers that are location aware, scenario aware, and give bank customers the solutions they need, when they need them”
On the other hand, one of the big challenges facing banks is that data is constantly streaming in from multiple channels, but it’s not always aggregated very efficiently or very effectively. Banks often don’t have their resources aligned to manage data the way it should be managed. Banks those are serious about leveraging their data to the maximum extent possible need to build a dedicated, skilled data team. While automation tools can gather these vast amounts of raw data from all these various channels, it takes well-trained professionals to build the data models that allow a bank to not only make good decisions, but to make better decisions than its competitors. It may be tempting to distribute this responsibility to the various departments that are generating the data, but in my experience, this is a mistake. You really need that dedicated team working together to fully understand the data and unlock its true power.
I honestly believe that innovation starts with really understanding your data. Banks need to take full inventory of the data they have available. They need to gather the data they have across multiple silos and then leverage the power of the cloud to process and analyze that data. For example, a retail customer might have a FICO score of only 680. Taken on its own, that might not seem very impressive. However, if you know that he has been employed at the same job for 10 years, and that he always makes payments to the bank on time, you might be able to create a predictive model that gives a somewhat different – and enhanced – picture of that customer. Ultimately, the detailed analysis provided by the bank’s data team will lead to the creation of more innovative, consumer-centric products. And of course, this in turn leads to greater profits for the bank. The data team can lead the way to innovation.
Right now, a lot of financial institutions are beginning to look at so-called wearables. I think wearables may have application for financial institutions in terms of location awareness. For example, a bank customer might visit a Home Depot to make a $6,000 appliance purchase on his debit card. Based on his customer profile, the bank might determine that it can offer that customer some sort of financing for that purchase, and that the customer would probably accept it. In other words, I think wearables will further enable banks to make product offers to customers that are location aware, scenario aware, and give bank customers the solutions they need, when they need them. This same technology can be applied at a bank’s branches. If the bank can detect that someone is a high-value customer as they walk in the door, the customer’s service experience can be tailored accordingly. For a tier one customer, the branch manager might even greet that customer at the door.
One of the biggest challenges that bank CIOs face is figuring out how to introduce consumer-facing technology. The task may seem daunting considering the amount of money that large banks are able to invest in technology. For example, about 60 percent of community banks have not yet introduced mobile check deposits. Taking a step back, the question really is: How do I create an infrastructure where I can quickly and easily deploy these technologies. The trick is balancing the security that’s so necessary in today’s banking environment with the convenience that today’s mobile users demand. This all brings us back to cloud computing. As noted earlier, the cloud allows banks to scale quickly, which in turn allows them to deploy high-demand consumer-facing technology quickly. Today’s smart infrastructure investment is really an investment in the cloud. Banks that ignore the cloud will fall behind as their competitors become faster and more nimble.