The news that TD Bank Group will migrate its technology platforms to the cloud — in a similar vein to what Capital One Financial did earlier this year, but using a more gradual approach — may have come as a surprise to some. As American Banker editor at large Penny Crossman pointed out: at one time financial institutions thought their data and their customers’ data was too sacrosanct to ever store in a public cloud.
It was no surprise here. We expect this kind of calculated approach to be the strategy embraced by more banks in the months ahead. In fact, we’ve noticed that as Amazon Web Services (AWS) and other cloud service providers continue to gain ground, many banks are moving their fintech applications to the cloud.
In the case of TD Bank, the institution will migrate all 85,000 employees to Microsoft’s in-the-cloud version of Office (Office 365) and will then move on to derivatives pricing and risk analysis. One of the reasons banks are making this move is to cut costs.
Capital One Financial, with its more aggressive approach, says it will eliminate its data centers and expects to save as much as $600 million in 2021. While most won’t see that kind of savings, we estimate that most financial services companies can reduce their costs by 70% by moving to the cloud.
Granted, it doesn’t happen all at once and the migration must be thoughtful and well managed, but the savings are there. And that’s not the only benefit. Another key reason why banks are considering this is the positive impact it has on the worker and customer experience. And then, there’s data security. Amazon and Microsoft are spending heavily on cyber security, funds that no financial services firm can match.
For most, the hybrid approach that TD Bank is using will be the preferred strategy, moving some workloads to a public cloud and keeping others local in a private cloud. As new software applications are installed, banks will choose the cloud-based version. We’re already seeing this with marketing automation, sales force automation, CRMs and call center technology.
Later, core systems can be migrated to the cloud. This will require the bank to pay close attention to the integrations their platforms depend upon and making certain those connections are not broken during the move and, secondly, making sure they employ a team with the skill set required to get the job done.
Ultimately, we expect most banks to make the shift to the cloud. Once operations are in the cloud, the bank can develop and innovate at a faster pace than ever before by taking advantage of the benefits that cloud computing has to offer.