A 30,000-Foot View Of Retail Banking From Google Cloud

Zac Maufe, head of global banking solutions for Google Cloud, knows the biggest obstacle keeping American banks from moving to cloud — inertia. It comes partly as a result of being early movers.

“Financial services were early adopters going back to the 70s and 80s, and at that time they were very innovative, but it left them with a massive amount of tech debt.”

Now financial firms are moving to the cloud.

“We have been waiting for this for some time.”

The pandemic has accelerated the move to cloud as banks pushed ahead their plans for digital transformation to provide a much richer user experience, he added. Google sees a lot of banks moving applications to the cloud, preferably using cloud-ready apps.

“Some financial institutions are doing lift and shift, and while that is probably faster, you don’t get a lot of the advantages of digital transformation because transferring legacy to the cloud misses some of the innovation.”

Mainframe emulators for cloud do exist, but they aren’t as good as software developed for the cloud. Banks should think of moving to the cloud as an opportunity to upgrade their technology, he suggested.

Apps tend to be followed by a data phase.

“Increasingly a lot of customers are figuring out that processing data and analytics on-prem is very hard. Some financial firms have built big data lakes to get around product silos. However, without a common taxonomy for the data they can quickly become data swamps. Cloud can be an enabler for these processes.”

The emergence of AI and machine learning also works well with cloud computing, he said, citing fraud mitigation chatbots for customer service and automated loan processing an area where cloud provides great value by turning unstructured data into structured data.

“Finally, a lot of the innovation in retail banking is happening in the cloud. Most of the new generation of fintechs are cloud-first. If you are only in the on-prem game you are missing out on the cutting edge.”

Speaking in between December AWS outages, Maufe said a multi-cloud strategy is really important.

“We provide tools to make it easy to do it. You want to have interoperability of your apps so you can switch them over, we have tools to run so that you can run in multiple clouds. Some people refer to multi-cloud as analytics in one space and apps in another, but if you think about resilience that isn’t the best way to go.”

Asked about the latency created with two or more data centers operating with the same data flows, he said latency is an issue but there are ways to stream and have roughly replicated data.

Maufe counted off four big things he expects to see in banking for 2022.

“Embedded finance will really take off. We have been seeing it for a long time. The first time I got into a rideshare and the payment was embedded — that was when I went Wow that’s the future of financial services. Financial products are enablers of something you want.

“Second, self-service at scale. Covid has really accelerated this. Branches — we have all learned to live without them when you do everything from home online. Digital natives have really figured this out — how to do everything in the app from end to end. We will get more apps like mortgages through self-service. I think that will be the new norm.

“The third trend is the democratization of the public cloud. We have seen what cloud did in retail and the ability to build a company really rapidly, with nearly infinite scale and not have to pay upfront for the technology. We are starting to see it in banking with a market space as a building block and other capabilities on top of it and the differentiator coming around data, machine learning and AI.

“The final trend — the U.S. is going to finally catch up with Europe and APAC in the fintech space. We have seen Block and SoFi, and some other fintechs, starting to get massive scale. It will be interesting to see how that starts to change the industry dynamic.”

He sees more similarities than differences in the use of cloud across geographies, but differences among industry segments with capital markets and payments a little ahead.

As a former chief data officer (and head of corporate strategy, head of digital channels and head of innovation) at Wells Fargo he thinks banks have been slow to use their data to improve customer experience.

“All these financial institutions grew up in product silos, so having a horizontal view of your data provides an enormous benefit.”

The large banks have incredible data because they get extensive data when someone applies for a loan.

“Your paycheck data goes into your primary checking account, you have transaction data if the customer has credit card or debit cards with you. It’s surprising how little data you need to get quite deep insights about someone. That is is only being scratched now. It’s harder than being able to recommend a book based on past purchase — financial services is much more complex than that.

“If you have kids and I don’t, our financial needs will be very different, so you have to go deeper, which is why financial services has been a relationship business for so long — advice and guidance were driven by human interaction. I think there are really the ingredients to do the same thing in a virtual way.