Leveling the Playing Field: Cloud as the Enabler of Innovation in Financial Services

Scott Mullins

The words “fast”, “affordable”, and “hassle-free” are seldom used in conjunction with financial products. However, broader trends are revolutionizing how companies deliver new experiences and engage with customers across the industry.

Today’s business differentiators, such as the use of chatbots to automate interactions with customers, are possible due to the advances in technology provided by cloud. By reducing barriers to innovation such as cost, time-to-market, and security, the cloud is enabling financial services providers to rethink – and transform – the way that the industry works, and the value that it provides.

Drive agile innovation within any organization

While large scale and significant size can provide advantages—including access to abundant customer data—they can also contribute to established organizations being less agile than newer market entrants. Established banks, insurers, and asset managers must balance their large scale with the need to react nimbly to market conditions and quickly address customer demands for faster, easier, and better services. Complicated legacy IT infrastructure and processes tend to isolate data in silos, leading organizations to miss opportunities to capitalize on data-led decision-making for trading, risk management, fraud surveillance, and even potential mergers and acquisitions.

Leveraging data effectively requires resources that many organizations, both large and small, cannot afford to maintain – namely, the capacity and tools needed to effectively and efficiently collect, store, and process massive amounts of data.

Using the cloud, organizations of all sizes can more easily and more effectively make evidence-based decisions regarding customer segmentation, pricing, product development, and cross-selling using analytics, visualization, storage, and other management tools. The cloud also provides the tools companies need to develop applications and deliver new solutions to market at the speed demanded by today’s consumer.

For example, Starling Bank, the UK mobile-only challenger bank, designed and built completely on the AWS Cloud, launched UK-wide earlier this year, after securing $70 million in capital. The bank uses AWS to deliver and scale infrastructure on demand while ensuring proper governance by managing developer privileges for releases on AWS via automation with Slack.

In an interview with Tech World, Starling’s Chief Technology Officer, Greg Hawkins, noted, “Some of the things that the cloud does is democratizing some of these high-end capabilities and making them available to you without having to make big investments. We move very fast by taking advantage of those capabilities.”

Meet scalability and security challenges at FinTechs

In 2017, according to the EY FinTech Adoption Index, an average of 33 percent of digitally active consumers used services provided by a FinTech company. Recognizing the inherent opportunity, FinTech companies are searching for new ways to leverage cloud technology to enrich customer experiences, grow their market share, and increase stakeholder value instead of building and maintaining a highly secure infrastructure.

One of the most successful examples of a FinTech startup using cloud to tackle scalability and security in a highly regulated industry is Robinhood. What makes the company unique is its $0 commission trades and mobile trading app that provides an easy-to-use experience for customers, and the ability to open a brokerage account in less than four minutes.  As a result, the company has recorded steady customer growth and recently announced that it now has three million registered accounts, has executed $100 billion in transactions, and saved investors $1 billion in transaction fees – with just 100 employees.

Using 18 distinct AWS services, some of which regulate access to services and data (simplifying compliance efforts) and help identify possible instances of fraud and money laundering, a team of just two DevOps professionals built the entire system. Launching and scaling at such speed – and with such robust security controls – without the cloud would have been impossible.

Meet complex compliance and regulatory requirements with ease

Indeed, cloud is providing the answer to many regulatory issues for both incumbent financial providers and FinTech startups, as all require the most robust security and compliance capabilities to meet regulatory obligations, protect themselves from threat actors, and instill confidence in stakeholders. Regulators also require secure, agile, and performant technology to improve their own oversight and support of the financial system. To respond to rapidly changing market dynamics, the Financial Industry Regulatory Authority (FINRA) made the decision to move over 90 percent of its data volumes to the cloud to capture, store, and analyze a daily influx of 37 billion records.

Operating comprehensive governance, risk, and compliance programs can pose a significant challenge to financial institutions due to the need to manage risk across business lines, global regulatory regimes, and large employee populations. By providing virtually unlimited computing and storage capacity and enabling integration of disparate data sources, the cloud can mitigate many of these issues. Moreover, extensive security certifications and accreditations, data encryption, and strong physical security all contribute to a more secure IT infrastructure, while automation decreases the chances of human error and saves time and capital.

Cloud is the new normal

For both incumbents and FinTechs, cloud is the new normal. The industry has evolved in the way it thinks about this technology, and cloud is now ingrained in daily business operations and is ushering in a new wave of innovative solutions from players of all sizes.

Today, the opportunities that exist in financial markets are no longer only available to large organizations with deep balance sheets who can afford capital-intensive projects; rather, the advent of cloud as the “new normal” in the industry has leveled the playing field for players of all sizes, enabling them to compete on the merits and value propositions of their products and services.

Scott Mullins is Head of Worldwide Financial Services Business Development at Amazon Web Services (AWS), where he is responsible for leading the development and execution of AWS’s strategic initiatives in the financial services industry around the world.  In his 17 year career, Scott has worked for firms such as JPMorgan Chase, NASDAQ, Merrill Lynch, and Penson Worldwide.  As a founding member of NASDAQ’s FinQloud team, Scott was responsible for global business and product strategy and a co-inventor of the first cloud-based storage solution for compliance with regulatory records retention requirements.  Before joining NASDAQ, Scott ran Surveillance and Trading Compliance for one of the nation’s largest clearing broker-dealers, with responsibility for regulatory response, emerging regulatory initiatives, and compliance matters related to the firm’s trading and execution services divisions.  Scott’s involvement in emerging financial services regulatory initiatives has resulted in numerous presentations to members of the House Financial Services Committee, SEC Commissioners and key staff, as well as FINRA’s leadership on proper implementation and possible impact of proposed regulations.  Prior to his roles in regulatory compliance, Scott spent 10 years as an equity trader.  A graduate of Texas A&M University, Scott is a subject matter expert quoted in industry media, a recognized speaker at industry events, and serves on the advisory board of the FinTech Sandbox.