In an interview with Specialist Banking, Anand Subbaraman, general manager of digital and retail banking products at Finastra (pictured above), discusses regulators’ attitude to cloud banking, and the prospect of challenger banks holding monopolistic power in the sector.
What would you say are the three fundamental benefits of cloud-based software for specialist banks?
The first fundamental benefit of cloud-based software is the scalability and flexibility of infrastructure that it allows specialist banks to have. Banks can buy or rent computing power as needed and flex capacity up and down. This allows for lower maintenance of the infrastructure because it can be completely outsourced to the cloud and a greater focus placed on business decisions. Second, cloud technology allows banks to always be up to date with the latest versions of core banking and software, which really helps in reducing the cost of maintenance or updating legacy systems. Third, and perhaps most importantly, the network effect enables banks to assimilate information from a huge number of data sources and use that information to make better business decisions. This is only possible with cloud technology.
Are regulatory pressures preventing incumbent banks from adopting cloud solutions?
No, I think regulators are extremely open to the cloud. They have very specific guardrails in place for how a bank needs to operate in a cloud environment to allow for data sovereignty. Of course, banks need to satisfy regulators when it comes to security and regulatory reporting, as regulators want banks using cloud technology to be as safe or safer than traditional on-premise environments. Regulators want to ensure a level playing field, and ensure that ethical standards surrounding security, data residency and regulatory requirements are met. But as long as banks have those ethics built into their ethos, then there is no reason why incumbent banks should feel held back from cloud technology.
Does cloud banking have a limit in your opinion? Do you think there is anything that could take its place one day?
Every now and then something new comes up. Cloud computing is part of the fourth generation of computing, so we have moved from mainframes, to mini-computers, to the internet era and now to the cloud. There will be a fifth generation, absolutely, but who knows when that will happen? We are still very much in the early stages of the cloud generation.
Do you believe challenger banks will one day hold monopolistic power in the sector?
No, I don’t think so. Banking is splitting into three avenues. You have traditional banks that have an entrenched portion of the market and data, who will continue to do well provided they take advantage of new technology. We now have challenger banks coming in with different business models and different technology models. Some will die out, some will be successful, some will be acquired by bigger financial services firms. Then we have the big tech companies edging into financial services. . All three avenues will co-exist for a long time; I don’t see one having a monopoly over the market.
How did you get into the industry?
I have a very varied background, I worked in strategy in Boston for a while and then worked in technology for more than 15 years, both in San Francisco and then in Bengaluru in India. Really, I ended up in Finastra out of serendipity; it seemed like an interesting move to jump into the world of financial services and to try to expand the boundaries of what I was trying to do. But the past few years have been the most exciting. Moving core banking to the cloud and getting customers up and running has been great. My role is extremely customer focused and that is perfect for me.
If you didn’t work in finance, what would you be doing?
I think I would still work in technology, probably on the retail side as that would be a very interesting consumer-focused view of the world. I’d like to work closer with consumers. I passionately believe that technology has changed the way that everybody works today, and how everything operates worldwide. There has been fundamental change because of what tech has done in the past few years, and there have been many moments where people have achieved what was previously unthinkable. Technology has been a great leveller — think about what we have seen with microfinance, for example. It has revolutionised access to finance, and that’s something which fascinates me. Providing everyone with access to finance is going to make a huge difference to the world.
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