At one time financial institutions thought their data and their customers’ data was too sacrosanct to ever store in a public cloud.
Now attitudes are changing. Banks have started to embrace the cloud as a way to cut costs, be more nimble and even improve security — arguing that no one spends more on security than cloud providers like Amazon and Microsoft.
Some, like Capital One Financial, are all-in. Its plans include eliminating data centers by the end of 2020 in the name of modernization and significant reductions in expenses. It could save $600 million in costs in 2021 because of those and other changes, Sandler O’Neill researchers estimated after Capital One issued first-quarter results.
“We have embraced the public cloud and are well on our way to migrating our applications and data to the cloud,” Chairman and CEO Richard Fairbank said on the McLean, Va., company’s earnings call last week. “We are now considered one of the most cloud-forward companies in the world.”
But the model for most banks may be a more gradual approach like TD Bank Group says it is taking. The Toronto company recently announced less ambitious, yet still significant moves to the cloud.
It has been migrating all 85,000 employees to Office 365 (Microsoft’s in-the-cloud version of its basic workplace productivity software). That migration is mostly complete, and it includes the use of Microsoft’s Intune bring-your-own-device platform.
TD Bank has also begun moving its first applications to the cloud: derivatives pricing and risk analysis.
Jeff Henderson, chief information officer of TD Bank, said the overarching goal is a better user experience for customers and employees.
“We've tried a few other platforms and integrating mobile platforms with other product suites was very, very difficult,” Henderson said. “With Office 365, we get an integrated suite and now our colleagues get a tremendous mobile capability that we were unable to offer before. We're doing all of this without compromising at all with respect to security and privacy.”
What the rollout changed
Using Office 365 and Intune, employees get native access on their mobile phones and tablets to Microsoft Office applications — in other words, they do not have to go through a web browser and the Microsoft tools run smoothly on iOS or Android devices. All this makes employees more nimble and productive, Henderson said.
“Think of opening email attachments on your mobile device,” Henderson said. “This is a much better colleague experience on the integrated Microsoft suite than we had before with integrating a third-party suite to Microsoft.”
The deployment of Office 365 has been free of any “unusual or insurmountable” problems, he said.
“Rolling out a new technology to 85,000 colleagues is never easy, but the partnership with Microsoft has made it much easier to overcome any of the challenges that we've run into along the way,” Henderson said.
The partnership with Microsoft is also helping TD Bank build other business applications outside the Microsoft product suite. One will help front-line staff manage their time better, he said.
“Think about how much more mobile you are in your personal life now than you used to be,” Henderson said. “I would argue that your corporate life has fallen behind that level of mobility. Think of the applications that are now available to you as a consumer, either in the iOS network or an Android network that is built for you to manage your personal life. Contrast that to the lack of mobility in applications that are available for you to manage your professional life. We've been trying to draw more balance between those two by giving a better mobile experience to our colleagues through the standard productivity suite from Microsoft as well as other applications.”
Cost savings come “occasionally,” Henderson said, depending on the workload that is being migrated to cloud.
“We are looking at each workload individually, and we're deciding where the best place is to host that workload,” he said. “That could very well be the Azure cloud. It could be other hosting options that are available to us as the best place to host. And the criteria can be performance, security and privacy, or efficiency.”
It is generally accepted that the cloud providers now provide better security than most companies can.
“There's no question the cloud providers have advanced their capabilities that we can leverage,” Henderson said. “There are other products available in the marketplace that also help us manage security. I would expect over time they will continue to enhance and get better and better and that will allow us to leverage the cloud even more in the future.”
For instance, encryption software helps keep sensitive data secure.
Derivatives pricing, risk analysis in the cloud
TD Securities has begun putting derivatives pricing and risk management in Microsoft’s cloud.
“A terrific use case for the cloud is what we refer to as high-performance compute,” Henderson said. “So in this case we're referring to workload that is a extremely intensive from a compute or horsepower perspective, but it's not always consistent. So you're talking about large fluctuations in how that workload consumes the compute. And this is a great use case for public cloud because you pay for what you consume.”
Instead of having powerful servers sitting around waiting for quantitative analysts to come up with models they want to test, these servers are sitting in Microsoft’s cloud and users only pay for the time they use them.
Another reason it makes sense to do derivatives pricing in the cloud is the data used is not that sensitive. It does not include personally identifiable information, but more market and product data.
“It’s a lower barrier relative to security and privacy,” Henderson said.
There is still data TD Bank is not ready to put in the cloud, sensitive data and restricted data that Henderson did not want to discuss in detail.
There are also certain workloads the bank wants to keep close, in its data center. Again Henderson did not want to elaborate.
“That's why you see the growing nature of what's referred to as a hybrid cloud,” Henderson said. Some workloads stay on the premises in a private cloud and others in a public cloud, and the two interact with each other.
TD Bank will be gradually shift to a hybrid cloud. The bank built a private cloud several years ago and has several hundred applications running on it. A “large majority” of these will be migrated over time to the public cloud, Henderson said.
U.S. and Canadian regulations have to be factored into the bank’s decisions around which applications will stay and which can go to the cloud.
For instance, rules around data residency have to be taken into account. Some data privacy rules require companies to know the exact geographic location of their customers’ personally identifiable information.
Most cloud providers now have the capability to meet the data residency regulations, Henderson said. It just has to be built in and managed accordingly.
Henderson insists his company does not just look at cloud computing, as many do, as cheaper infrastructure.
“That's not really what's driving this,” he said. “What's driving this is our strategy at TD is to deliver a legendary customer experience. The definition of delivering legendary customer experience is changing at a very rapid rate. And that's forcing us to look at how we keep pace with that innovation and how we deliver that innovation and pass it on to our customers in the form of an even better customer experience, a more connected experience, a more personalized experience and an overall breadth of experience, and deliver that experience in a mobile way and in a digital way. Because these platforms provide us the capability to be more agile, and being more agile allows us to be more innovative. And it allows us to do all of that once again, without compromising on control and security.”
Moving work to public clouds will inevitably change the size and shape of TD Bank’s workforce.
“We absolutely need to make sure we have the right talent to manage within this space,” Henderson said. “So that's going to require some new skills coming in, and it's going to require us to retool the skills of some of our existing workforce. And we have both of those going on very actively.”
Employees are not afraid of losing their jobs, he said.
"People are not worried as long as we are open and transparent with everybody about what we are doing and why we are doing it and the outcomes that we expect out of this,” Henderson said.
Training and support are provided for colleagues that wanting to learn new skills, he said.
“We would not be successful if we think that we can source 100% of this talent from the street, nor would I want to,” Henderson said. “We have a terrific workforce today that understands the bank, understands the culture, understands how we operate, and we've had terrific response from colleagues who want to be part of the future and want to learn new skills because they also see these capabilities as the future of not only banking, but the future of technology and how technology is consumed.”
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