Canadian banks are moving quickly to the cloud amid COVID-19 and fintech competition – National

Large Canadian banks are undergoing migration.

Faced with growing competition from startups, higher consumer expectations and increased digital demands for COVID-19, experts say banks are accelerating a monumental move of operations to the cloud from legacy IT systems.

The move 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 and caused the acceleration, said Robert Vokes, chief executive of financial services for Canada at Accenture.

“What happened was in March of last year, all of a sudden people were like, ‘Oh my God, I have to go a lot faster.’ It was the great awakening. ”

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Cloud-based systems, sometimes privately managed by banks and more often by third-party tech giants, allow data to move faster and more freely, and offer banks the opportunity for greater personalization for each customer, more automation, as well as potential savings. .

Such promises have been around since the dot-com bubble, Vokes said, but the hardware has only lived up to it in recent years.

“We didn’t really have scalable technologies, and now those technologies have caught up. “

Several banks have made significant cloud commitments in recent months, including CIBC’s deal with Microsoft’s Azure, Scotiabank which has entered into a deal with Google Cloud, and BMO’s partnership with Amazon Web Services while ‘They all advocate “cloud first” strategies.


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BMO recently completed its first major system change since partnering with Amazon by moving all of its transportation finance operations to the cloud, which involved moving around a thousand data servers.

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The bank made the move because it was ultimately convinced the cloud infrastructure was established and sufficiently reliable, said Sid Deloatch, director of information and operations for commercial banking in North America at BMO.

“We had to meet that threshold of expectation, and we think it exists and we are very confident that it exists now, and that’s why we are moving forward.”

This change allows BMO to offer automatic lending decisions in many cases, as well as save up to 30% on operating costs, he said.

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In addition to waiting to gain confidence in new systems, banks have also been held back by the patchwork of legacy systems built over decades, said Sanjay Pathak, head of technology strategy and digital transformation at PwC.

“Untangling the current operations of some old technologies is very, very complex and it can be very risky and disruptive for businesses. “

He said getting leaders to the right mindset was a challenge, as it means giving up control of the underlying infrastructure built over decades.

But banks can’t delay any longer as they sense both consumer pressure and employee expectations for more transparent processes, Pathak said.

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Small banks without extensive legacy systems were able to scale faster, like EQ Bank moving their entire system to the cloud in 2019, while new financial startups have the advantage of starting in the cloud and forcing banks to react.


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“There’s this great pressure on financial services from fintechs, and fintechs are often born in the cloud. They scale quite quickly, they use fully digital capabilities, ”said Hillery Hunter, CTO at IBM Cloud.

She said banks are moving more core systems to the cloud as there are many data sources that need to be integrated and readily available to be able to make decisions like instant loans.

“(Consumers have) all become quite impatient and we expect things to be instantly available.”

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However, the growing reliance on third parties to host much of the bank’s operations, including personal financial data, is raising concerns from regulators.

The Bank of England said in October that further policy measures were likely needed to “mitigate the risks to financial stability resulting from the concentration in the provision of certain third-party services”.

The Canadian banking regulator earlier this month released draft guidance on technology and cyber risks, according to which banks should plan exit strategies for third-party cloud providers and ensure they can transfer data from them. ‘one cloud provider to another. It plans to release more specific third-party guidelines early next year.

But while the main concerns now are about data security and ensuring that big tech companies don’t have too much power to dictate terms of service, competition can also become a threat, Pathak said, as the big ones Tech companies have both the scale and the speed to become a threat.

“There is growing tension, I think, around the fact that cloud providers are also becoming competitors… it’s a real threat to the banks. “

© 2021 The Canadian Press

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