Covid's Quick Tech Shift: From Financial Sector Innovator to Monitor

Banks were able to quickly adjust their operations in response to Covid-19.

"The pandemic showed the industry that rapid change was possible," said Scott Mullins, head of worldwide financial services business development at Amazon Web Services (AWS). "There had been hardly any appetite in the industry to try to go after modernization. That has changed rapidly. The pandemic was an accelerant. Organizations had to make some tech choices quickly for remote work or interacting with customers from a digital perspective; Covid moved us forward very rapidly, and showed we could handle tech change much faster than we thought."

Cloud computing allowed financial services firms, including banks and exchanges, to take advantage of its power and flexibility.

Mullins said that, as a result of the pandemic, some companies were able to provide support for employees working from home and others used it as an opportunity to undergo deep changes.

A global bank used Amazon Connect, a call-center service designed by AWS in part to help companies get customer service agents up and running remotely, and dismissed 6,000 customer service agents when the pandemic began.

"The bank's agents were up and running with Amazon Connect in 10 days, a process that normally would have taken up to five months. At BBVA, using Amazon AppStream 2.0 enabled more than 86,000 employees around the world to work remotely, ultimately reducing implementation time by 90% compared to on-premises projects."

Mullins said that other banks have undertaken deep modernization, Itau in Brazil has completely removed its use of mainframes and gone to cloud to reinvent the experiences of 60 million users. JP Morgan announced a new digital bank in the UK and has said it will move its core to the cloud—based Thought Machine.

"People are willing to do really extensive work in modernization.” Some are rewriting old code to run on the cloud, other are using entirely new technology, and some are doing a combination of both.

"It's not binary," Mullins said about the choices they are making. "The decision to recompile old code, use new technology, or go for a combination is often determined by what will bring customers the most value without being overly disruptive. When BB&T and SunTrust merged to form Truist, the new brand needed a seamless digital migration that reduced risk and allowed for integration while still maintaining legacy platforms and security, as well as removing dependencies for speed. By creating APIs at different layers of its digital stack, Truist was able to build its user experience architecture on top of current APIs and integrate with legacy systems."

When it comes to choosing a new technology, firms may switch because they can't find staff who can, or want to, work with the old language.

"Our roadmaps for our technology are driven by inbound requests from customers and we think ahead," Mullins said. "If we find that a need is not being met by the current services, we will build it, for financial services or multiple industries - fraud prevention services, for example."

"90% of AWS's product and service roadmap comes from customer requests. The other 10% of our innovations come from needs that customers don't even know they have yet."

Amazon Quantum Ledger Database (QLDB) and Amazon FinSpace are two applications that were created by AWS to help the financial industry. QLDB is a fully managed ledger database that provides a transparent, immutable, and cryptographically verifiable transaction log, while Amazon FinSpace helps store, catalogue, and prepare financial data at scale.

Mullins sent examples of customer success stories in response to a request.

In the case of digital banking innovation: Mox Bank Limited, one of the fastest-growing banks in Hong Kong history, was able to go from initial licensing to market deployment of its cloud-native and digital bank in 18 months during the Covid-19 pandemic. In that first month alone, it signed up over 35,000 customers. The cloud-based bank runs on AWS and offers a suite of services entirely digitally through its mobile app.

Vanguard is using machine learning on AWS to personalize financial advice. The company used AWS services such as Amazon SageMaker to optimize rule-of-thumb recommendations with more sophisticated financial advice in order to maximize retirement wealth and spending for investors.

In November 2020, Solarisbank AG, Europe's leading Banking-as-a-Service platform, announced that it has successfully migrated all of its core banking systems, digital products and databases to AWS. As a result of this migration, Solarisbank is the first bank in Germany to fully migrate to the cloud. By combining its full German banking license with an API-based banking infrastructure, Solarisbank enables its business partners to offer financial services quickly and seamlessly.

Snowflake is an AWS partner and delivers the Data Cloud, a global network where thousands of organizations mobilize data with near-unlimited scale, concurrency, and performance. Customers can easily use data they have in Snowflake from Amazon FinSpace, where quantitative analysts can find and access data from multiple sources to develop trading strategies and perform risk assessments. Capital One uses the Snowflake Data Cloud to understand changes happening in the world and react quickly to address its customers' evolving needs.

Mullins explained that there are a variety of companies in the financial services industry - some of which want to build their own software and others that rely on software built by others.

Some regulators have proposed that financial services firms use more than one cloud provider for redundancy, but Mullins said that is not a common practice.

“Most organizations try to mitigate this risk by spreading their workloads across multiple cloud providers, but they may also use a niche offering or a specialty use case from another provider. They usually choose AWS for core, mission-critical workloads, and they often deploy those on the provider's infrastructure.

He anticipates that open banking and open finance will soon become the standard in the U.S.

"Open banking started in Europe, spread to Asia-Pacific and Latin America, and is now coming to the United States. The pitch for open banking is that it gives consumers control over their information, so they can move it from one financial institution to another.

Implementation has its drawbacks, he noted. It benefits challenger banks because it makes it easy for customers to switch from their old bank to a new one. But even in the UK, where open banking is mandated and challenger banks are popular, it takes time for customers to commit to a new bank. Many still leave their direct deposit of pay with the banks they have been using for years.

“It will take time for those practices to develop.”