(A version of this post was originally published on the Realization Group’s Blog.)
Until fairly recently, the financial markets sector had been slow in its adoption of cloud technologies, compared with some other industries. However, that is now rapidly changing, as recent announcements from HSBC and Deutsche Bank about their strategic partnerships with AWS and Google respectively testify. London, one of the top financial services hubs in the world, is no exception.
Clearly, investment banks are buying into the cloud computing paradigm. And the unprecedented events of 2020, leading to a massive growth in the need for technology to support home working during the current pandemic, has accelerated this shift.
But firms are not just utilizing the cloud for their own internal digitalization initiatives. Today, more and more financial institutions are building out increasingly innovative new products and services for their customers and making them available on the cloud, ‘as-a-Service’.
Recent examples we’ve seen include Goldman Sachs’ Marquee platform, which provides customers with cloud-based access to the firm’s analytics, insights and data; CitiVelocity Clarity, Citi’s data and analytics platform that makes use of big data and cloud technology; and UBS’s Neo, a cross-asset digital banking platform built entirely on web technology.
The Ongoing Evolution of Cloud in Capital Markets
In this Financial Markets Insights report from Equinix and The Realization Group, experts from Microsoft, Reﬁnitiv, Pico, Finastra, Beeks Financial Cloud, Lloyds Bank, PwC and Equinix discuss the challenges and opportunities of utilizing public, private and hybrid cloud to build out unique ‘as-a-Service’ oﬀerings.Download the paper
Cloud deployment models
When rolling out these products, firms are not necessarily dependent on the public cloud. At Equinix, our clients can choose to run their own private cloud hosted on Equinix infrastructure, or they can deploy a hybrid cloud model, utilising both public and private cloud components. And there are three distinct types of cloud service that can form the basis of whatever product or service they are offering:
Infrastructure-as-a-Service (IaaS), where the service provider delivers the virtualised computing infrastructure components, including servers, storage and networking hardware. The user controls the operating systems, storage, and deployed applications.
Platform-as-a-Service (PaaS), where, in addition to the underlying infrastructure components, the service provider also manages the operating systems, storage and middleware. The user controls the applications that are deployed on the platform.
Software-as-a-Service (SaaS), where the service provider hosts and manages the entire infrastructure, including the end-user applications. The user does not therefore need to install anything, as the applications are typically accessible from a thin client interface, such as a web browser.
IaaS deployed over the public cloud is often used when a ‘burst’ of computing power is needed to support resource-intensive processes. Examples include processing high volumes of trades at peak times, calculating complex simulations around liquidity or capital requirements, developing and back-testing trading algorithms using large data sets, pricing complex derivatives or running extensive risk simulations across multiple books.
With PaaS, firms typically use additional cloud capabilities, such as data analytics, artificial intelligence and machine learning tools, to parse and evaluate large data sets. Some use cases here might be surveillance and monitoring of trading activity to prevent market abuse, various types of predictive analytics around sales & trading, or generating new business and customer insights, for example.
SaaS products are typically end-user applications designed for a wide variety of purposes, including trading, portfolio analytics, market analysis, business intelligence, account management and so on.
Leveraging the cloud
As banks become more comfortable with these IaaS and PaaS aspects of the cloud for their own systems, they can start to build the groundwork for longer-term cloud strategies, including building out PaaS or SaaS offerings for their own customers. And this is what a number of banks are now actively doing.
There are some pre-requisites to this however.
First, firms need to identify which customer applications, data or services are best suited to a cloud environment. Many existing applications may run on legacy architecture, and have operating models with complex dependencies, making the transition to a cloud environment more difficult.
Also, banks cannot compromise on the security of their customers’ data, so when providing access via the cloud, they need to ensure there are clear and detailed processes and procedures around security and privacy of data that can satisfy both their customers and the regulators.
From a technology perspective, building new applications around a microservices and containerised framework utilising open-source orchestration systems such as Kubernetes (or migrating applications to this type of architecture) will give the firm a solid foundation for rapidly rolling out and assessing new products.
Finally, banks need to ensure they are adopting new ways of working by embracing delivery approaches such as DevOps, in order to build, test and deploy new applications seamlessly and efficiently.
In summary, financial institutions are now far more comfortable with the cloud than they ever have been before, and they are beginning to use it in increasing numbers. As cloud adoption continues to accelerate in the capital markets sector, Equinix is committed to helping its customers leverage cloud capabilities to produce increasingly innovative customer-facing applications, which will undoubtedly help them to become more successful.
Download our latest whitepaper: “The Ongoing Evolution of Cloud in Capital Markets” to learn more about the challenges and opportunities of utilising public, private and hybrid cloud to build out unique ‘as-a-Service’ oﬀerings.