[ I N- D E P T H | C L O U D S E R V I C E S ]
phase in its evolution. Global organisations such as Capital One have been steadily migrating their entire business on to the cloud, largely due to the cost and speed benefits it produces.“ Most organisations like having a lower variable expense in the cloud than they can do on their own. Moreover, they really like the elasticity as their demand fluctuates,” explains Kain. AWS is both disrupting the financial services industry directly and indirectly, ever, it is now looking to modernise these platforms and turning to externally-hosted, public cloud vendors. In a recent white paper published by DTCC, it stated it would be expanding its leverage of cloud technology over the next three to five years, with the goal to reduce risk and improve security of its systems.“ We believe cloud computing has moved past a tipping point and that the security, scalability, resiliency, recoverability and cost of applications in the cloud are better
“ A situation where you can use artificial intelligence( AI) enabled AWS services that learn unsupervised instead of a traditional securities services provider for data management or reporting very well could be real in next few years.”
GURVINDER SINGH, CEO, INDUS VALLEY PARTNERS
as it is driving a new perspective from buy-side firms as to how they approach technology and who their service providers should be.“ With AWS, institutional investors can devote more time to innovating and addressing customer challenges and less time worrying about infrastructure and technology deployment. From testing and re-testing new applications quickly and consistently, to having global technological resources at their disposal, AWS provides them with more control over their technology decisions,” adds Kain. Indus Valley’ s Singh agrees, in which he has seen eight out of 10 buy-side clients putting AWS or a similar kind of cloud infrastructure into their systems.“ It [ AWS ] is significantly disrupting the financial services world, whether it is visible or not. A situation where you can use artificial intelligence( AI) enabled AWS services that learn unsupervised instead of a traditional securities services provider for data management or reporting very well could be real in next few years,” says Singh.
Never the same again The recent surge by AWS in financial services does pose the question whether it will enter the securities services industry.
Market experts doubt this, considering the amount of regulation AWS will have to comply with to be a bank. Nevertheless, AWS has sparked a new way of thinking among buy- and sell-side firms over how financial and securities services are conducted.“ AWS itself is, in my view, unlikely to offer banking and securities services directly to institutional investors, but these investors will indirectly be absolutely reliant on AWS’ infrastructure and capabilities because they are becoming more and more essential to the financial services providers and market infrastructures across the industry,” says Thomas Lemon, managing director, technology consulting, Protiviti. Lemon adds that AWS and other cloud providers that harness open API’ s( application programming interface) and other disruptive technologies are likely to have an indirect effect on business and operating models.“ These indirect implications, which could spawn totally new business models, may be even larger than the direct impact of firms moving infrastructure to the cloud. This is likely to make existing financial services providers rethink their product and services strategies. They will either need to operate in the cloud, or with the cloud, or both,” he says. For the incumbent service providers that have been wary of the cloud, attitudes are shifting as more and more institutions look to take advantage of the benefits the technology brings. The Depository Trust and Clearing Corporation( DTCC) has been one of the first global financial institutions to move its workload to the cloud. Historically, DTCC’ s core platforms and systems had been hosted in private data centres, how- than many private enterprises could achieve on their own,” says Robert Garrison, chief information officer, DTCC.“ As a result, we will pursue a strategy of building a cloud ecosystem that supports best practices and standards.” Cloud technology also has several other applications in the financial services industry other than data security. Large custodians and securities services providers now have to contest with faster, more agile start-ups that were born out of the digital age and were early adopters of the cloud. In order to stay competitive, the incumbents will have to first remove the spaghetti of legacy technologies that has hampered their evolution. Custody banks and market infrastructures sit on an enormous amount of client data, being that for net asset valuation( NAV) data, investment book of record( IBOR) data etc, and the challenge is to free up their crowded data centres in order to gain flexibility and achieve scalability. They can replicate the models employed by AWS, Google and other cloud providers to decipher these data sets and help create value. Banks including Citi and BNY Mellon have made a number of significant efforts to migrate their custody and fund services
44 Global Custodian Spring 2018