Flexible and without compromising security and compliance – this is what a modern software solution for financial institutions should look like. The use of cloud technologies can be the right step on the path of digital transformation. Together with IBM and knowis, Aareal Bank has implemented a cloud strategy for outsourcing business processes, which takes into account the specific banking requirements. In a detailed interview in IT Finanzmagazin, the project participants talk about their motives and experiences.
The identification of suitable use cases and the selection of the appropriate cloud operation model are, in addition to compliance with the regulations, essential factors of a successful cloud strategy. At Aareal Bank, supported by IBM and knowis, a platform was implemented that digitally executes credit initiation and credit decisions using cloud technologies. The solution is the first outsourcing of a banking business process to the cloud – a premier in Germany.
Bringing More Flexibility to Rigid Core Banking Structures
In many cases, outdated core banking systems prevent a quick and uncomplicated implementation of changes due to their monolithic structure. Especially in times when flexibility and speed are the be-all and end-all when it comes to the go-to-market of new products, this sluggishness is increasingly becoming a serious problem for financial service providers. Modern platform technology in combination with an adaptable cloud IT infrastructure can remedy this and significantly shorten the time-to-market of new products and omni-channel-capable services.
These considerations also formed the basis for Aareal Bank’s decision to use the cloud, as can be seen in the interview with IT Finanzmagazin. “The most important motivation was certainly more flexibility in the realization of digital solutions. Changing individual parameters, expanding models, or integrating various data sources, is much easier with the new solution,” says Heinz Biesen, Head of Banking Transformation IT at Aareal Bank.
Cloud and Compliance is no Contradiction
Aareal Bank, which specializes in structured financing in the real estate industry, is now using the knowis isfinancial platform as a cloud solution. The banking platform is hosted in the IBM cloud and it fulfills all regulatory requirements that apply in the banking industry. “We accompany our clients on their way to the cloud and, together with the supervisory authorities, have coordinated the parameters for our products that enable our clients to achieve compliance in the cloud. The 'IBM EBA Cloud Compliance Certificate' is the most recent example: We have mirrored the EBA's guidelines on outsourcing directly in our IBM contract terms,” explains Jürgen Lang from IBM Germany to the readers of IT Finanzmagazin.
Technology and Business Functionality are Closely Interwoven
The importance of taking the business side into account when modernizing IT is particularly evident when it comes to digitization in banking. Especially in the lending business, there is a very high potential for the automation of time-consuming manual processes. With its cloud project, Aareal Bank was able to benefit from the knowis expertise in digitization in the lending business, and the flexible business components of the isfinancial platform. “The knowis technology has made it possible to transform the bank-specific processes step by step into digital solutions, to embed them in a modern architectural approach and to link them with existing systems and services from third-party providers,” sums up Michael Rehfisch, Head of Banking Solutions at knowis.
You can read the detailed interview (German only) with Heinz Biesen, Jürgen Lang and Michael Rehfisch in IT Finanzmagazin magazine.
When is Outsourcing to the Cloud Worthwhile for Banks?
Flexible IT architectures are required when analyzing large amounts of data in real-time or when flexibly switching applications on and off. However, the introduction of Payment Services Directive 2 (PSD2) is also a factor that should not be underestimated for financial institutions, as its implementation requires dynamic scaling of hardware and software. The reason: The opening of access to user and account data, and the connection of third-party services associated with the payment services directive, can result in a significantly increased demand for digital services. The implementation and operation of an in-house IT solution may therefore require significant investment to guarantee truly future-proof performance. Depending on the field of application, as well as the scope and existing IT development, effort and cost advantages can result from the use of cloud services. For each use case, financial institutions have to decide whether they want to adopt the on-premises variant or a pure cloud approach.
In any case, banks should first check all relevant internal processes regarding their 'cloud readiness' prior to outsourcing. Modernization measures may be required before applications are transferred to the cloud. To prepare the migration, it is therefore useful to create a roadmap with goals and necessary steps, in which, for example, the design of the cloud service to be used is noted. There is no one-size-fits-all recipe for this: It is up to the financial institution to decide which of its individual use cases are suitable for cloud computing and how extensive the migration process should be.
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