Interview in Financial News & Views on savings and retail banking (September 2023) by WSBI-ESBG.
Danith Valles is the Head of Architecture at CECA, the longest-standing Spanish member of WSBI-ESBG. Ms Valles is the Chair of the Banking and Technology Network (BTN) at WSBI-ESBG and an active member of the High Level Group (HLG) on Digitalisation and Innovation. Ms Valles has many years of experience as an IT professional in the banking and financial services industries. WSBI-ESBG is honoured to have her among our members, advocating together for innovation in retail banking and savings banks. Danith is a true cloud enthusiast and in the next few lines will share her thoughts on this innovative topic for the banking industry.
Could you briefly explain what the cloud is and why is it innovative for banks?
The cloud is a disruptive technology that will change the operational model of banks. The cloud has provided IT resources such as software and infrastructure services over the Internet at pay-as-you-go pricing instead of buying, owning and maintaining physical data centres and servers. Organisations of every type, size, and industry, including banks, can use the cloud for a wide variety of use cases, such as data backup, disaster recovery, e-mail, virtual desktops, software development and testing, big data analytics, and customer-oriented web applications. The cloud is innovative for banks because it changes the way banks operate and work, as new architectures such as data, applications, security and infrastructure are needed. In addition, the regulator's risk requirements need to be extended to the cloud.
What are the benefits for banks of adopting a cloud system?
Well, the cloud offers a variety of benefits to banking. For example, it increases scalability, resilience and reliability of both infrastructure and software, reduces technology debt by enabling less mainframe coupling, operational cost efficiency, reduces CO2 emissions (sustainability) and increases agility and ease of integration of innovative technologies such as artificial intelligence (AI) into banking processes. In addition, banks are using the cloud to enhance real-time fraud detection and prevention, payment platforms, on-boarding of retail customers, server virtualisation, etc.
You are the Chair of the WSBI-ESBG Banking and Technology Network (BTN). Could you please tell us a little more about the work of this Network?
I am honoured to be in charge of the BTN. We are sharing innovative topics, experiences and knowledge by holding events on topics of interest to members. The topics are selected based on members' feedback. We are adding knowledge and practical experience to the network with suppliers or partner collaboration who can add value by sharing experiences and use cases with community members. We also hold on-site events to build bridges and relationships between community members.
What are the main challenges facing banks when implementing a cloud system, taking into consideration the implications of the Dora Regulation?
The main challenges banks face when implementing a cloud system can be summarised as follows:
- Interoperability, that is, existing applications may require adjustments, refactoring, to interact with a cloud environment. A new operational model is needed.
- Data security and integrity risk. Migrations to the cloud can lead to data loss or corruption and can also open the door to hackers.
- Cloud experience. Traditional IT teams may not be familiar with cloud environments. Reskilling and upskilling.
- Cultural change, moving forward towards a digital culture and management that might appear to be resistant to change.
- Reimagining our business model by creating new value propositions and revenue models, that is, rethinking processes.
The main challenge for both Dora and the cloud is related to operational model risk, for example, rules for establishing and performing oversight of critical external service providers when they provide services to financial institutions.
Does the cloud system have a role in digital onboarding and customer relations?
Yes, the digital onboarding process can be provided by the cloud with technologies such as identity and verification (ID&V system) integrated with a fraud detection and prevention solution, both in real time. This will facilitate customer engagement where the customer can onboard with similar services, such as the office, but in a matter of minutes and anywhere in the world.
If you consider Dora and its implications, how do you imagine banking infrastructure in 5 years' time?
Within 5 years, most banks will have moved much of their infrastructure to the cloud. This means that the operational model will change. In practice, DORA will help banks to have more control over their resilience through established rules and conduct in all the processes of the operational model.