The Rise of Banking Business in the Cloud

The milestones for launching a challenger bank include securing shareholder buy-in, passing regulatory approval, and robust infrastructure

Three milestones for launching a challenger bank today include securing shareholder buy-in, passing regulatory approval, and sourcing robust infrastructure. The latter two are where cloud technology is helping to bring a new UK private bank, Hampden & Co., to market in near-record time. Having started its journey in June 2010, Hampden is set to open its first customer accounts by March 2015.

For the past 18 months, Oracle Financial Services has worked closely with the bank’s founder and chairman Ray Entwistle and his leadership team to make the most of recent industry reform and build a modern, compliant, and competitive new offering.

Oracle Financial Services is one of Oracle’s largest business areas, and it is seeing increasing adoption of the cloud as British banks’ IT platform of choice.

Although Hampden is the first bank to go live on Oracle FLEXCUBE on Oracle managed cloud services from UK facilities, Oracle has worked with more than a dozen UK banks in a similar way (most often on premises), and the “banking business in the cloud” trend is certainly set to continue.

A notable draw of Oracle’s cloud technology for challenger banks such as Hampden is that it is attractive to regulators. Oracle is recognised as having provided core banking platforms for several well-known, established banks. A trusted technology provider’s name, combined with the wealth of experience of Hampden’s board and the stability of its business model, can go a long way toward lowering perceived risk and securing an operating licence.

Using the cloud as the basis for building a new bank’s infrastructure also means that various needs and functionalities can be integrated and accessed in a single place, providing a holistic user — and end user — experience. Typically, Oracle provides banks with the assistance to configure, test products, and integrate to pay, clear, and report for Oracle FLEXCUBE customers directly or through partners and then goes through extensive user acceptance testing to ensure the experience the banks wish to deliver is built in before going to market.

The Oracle FLEXCUBE platform is the core engine for Hampden’s business, and Oracle Financial Services and the bank have just successfully completed a multistep deployment.

Additional benefits of the cloud for new banks include flexibility and scalability. With the cloud there is no need — now or in the future — for physical IT migration, so costly legacy issues will become a problem of the past. Cloud providers will offer a pay-as-you-grow operational expenditure (OpEx) model for their services, meaning affordability even for smaller businesses and the ability for those businesses to enjoy the world-class services of international providers. Technology stands to level the banking business playing field.

Business IT via the cloud is simple to manage and generally requires very few specialists on staff. Most banks run their IT in-house, but where (like Hampden) they opt for a managed cloud service, the provider carries out all complex activity and serves up only what the customer needs.

Times are changing, and although British banks no longer need to have a “branch in every town,” providing clients with on-demand and consistent access to services via multiple channels must be prioritised for banks to stand out in what will be an increasingly crowded market.

Success in this industry requires a business and technology architecture that delivers digital engagement, externalised customer-centric processes, and componentised core capabilities to enable a very efficient, customer-focused operation.

For many of today’s banks — whether challenger or established — the temptation can be to stick with tradition, but any that hope to thrive must be forward-thinking and open to ongoing change and improvement. To deliver excellent customer service, banks like Hampden must continue to utilise a scalable, secure, and adaptive banking platform in the cloud that can be built upon as innovation in business technology continues.

Senthil Kumar is vice president business development, Oracle Financial Services