Google Cloud CEO, Thomas Kurian shares his thoughts on how banks are using cloud technology to drive digital transformation.
Over the last few decades, banking executives have been told that fintechs will upend the financial system, that digital-first challengers will disrupt their customer base, that Bitcoin will replace fiat currencies and that, technologically speaking, they’re dinosaurs facing certain extinction. Yet, banks continue to thrive by providing consumers and enterprises with critical products and services that underpin the global economy.
A financial instrument is at its core a form of information, and financial institutions are responsible for creating, selling, and servicing these digital products. Put simply, the core business of a bank is using technology to create and distribute information in new ways. Ironically, technology companies share a very similar approach—managing large quantities of digital information; using AI (artificial intelligence) and machine learning (ML) to process data more efficiently; and using that data to attract customers in new ways.
So why do tech and banking share such an uneasy relationship? As CEO of one of the largest cloud providers in the world, I think there are new ways we can work together.
Historically, it’s true that technology providers have framed their discussions with banks—and the cloud debate, in particular—in reductive ways. We’ve focused on providing lower cost infrastructure, championing how they can implement raw compute, storage, and networking more cheaply and efficiently. We’ve reduced the argument to a cap-ex vs. op-ex exercise. And, in doing so, we’ve discounted how innovative banks, working hand-in-hand with their technology providers, can use new technologies and the cloud as a powerful and transformative platform for their businesses.
Today’s digitally savvy banks are using the cloud to process vast quantities of information to rapidly construct and sell financial products that differentiate themselves in a highly competitive market. They’re using real-time market information streamed into extremely large-scale, real-time databases and AI/ML models to quantify and price risk. Every second that is saved in processing this information allows them to offer products at lower cost. Whether built using analysis of vast amounts of market data or by applying algorithms on top of historical user info, innovative banks are leveraging new cloud technologies to understand risk, segment customers, track market movements, create new instruments, and price them differentially.
Importantly, banks can also leverage the cloud to become more capable at combating fraud and money laundering. By using more dynamic AI and ML models, rather than static rules-based systems—combined with transactional and behavioral data—banks can now more accurately detect evolving fraud patterns while avoiding costly false positives. Similarly, cloud-based tools are being applied toward banks’ own risk-management systems to calculate liquidity and exposure significantly faster, to perform mark-to-market adjustments, and to help them better balance their books.
Of course, it’s easy to forget that customers may stand to benefit the most from cloud-enabled banking. Innovative banks can create experiences that more closely resemble the best digital ones in other industries, such as pre-ordering groceries online or getting recommendations on the best TV shows to stream. For example, imagine a bank automatically suggesting a better interest rate based on your tax situation. Or applying AI to your spending patterns and proactively suggesting a conversation with a financial advisor after your annual bonus hits your checking account. Imagine being able to submit a mortgage application from your mobile phone and getting an approval in minutes. Gone soon will be the days sitting in windowless offices, signing pages-after-pages of paperwork.
Today, the cloud is reshaping the technology landscape, and it has the potential to transform banking well beyond core infrastructure. It’s time for tech companies to put aside the counterproductive talk of disruption, and instead work with banks to help them do what they do best—building and delivering great financial products and services to customers.
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