Banks and financial services providers can realize the efficiency and cost savings of cloud-based payments by taking proactive steps to guard against these common mistakes, notes Rustin Carpenter, a Global Payments Solution Leader for Cognizant’s Banking & Financial Services Industry Services Group.
The cloud’s lure of simplification is a powerful incentive for payment providers, as its role enabling modernization and permanently switching off legacy applications. Where banks struggle, however, is in shaping a strategy to get their payment services to the cloud. By understanding the common missteps, banks can create a plan for payment migration that maximizes benefits while minimizing risks.
The pandemic was a digital tipping point for banks, forcing them to implement in just a few months capabilities that otherwise would have taken several years. Research published in 2019 found that financial services firms lagged in adoption of public cloud infrastructure as a service (IaaS), with just 18% broadly implementing IaaS for production applications, compared to 25% of businesses overall.
Now many banking leaders we talk with are taking a serious look at cloud-based payment services, motivated by the age and complexity of their core payment applications as well as their business’s growing confidence in the security of cloud platforms such as Google Cloud, Microsoft Azure and Amazon Web Services (AWS). As banks contemplate migrating payment services to the cloud, here are some common mistakes to avoid that will ensure a smoother journey:
1. Assuming the cloud is cheaper.
Cloud-based services are indeed less expensive to run — once applications and services have been migrated. To manage a successful payments migration, be aware of the costs along the journey. The cloud can be a heavy lift. While banks and financial services providers often consider themselves proficient at consolidation and rationalization, the extensiveness required for cloud migration frequently far exceeds the effort of previous initiatives. For example, we helped a bank reduce its infrastructure footprint by 25% and lower its total cost of ownership by migrating its applications to the cloud.
That outcome, however, required careful analysis of the bank’s application source code and development of a migration strategy and cloud deployment architecture, as well as assessing and migrating more than 800 applications over three years. Cloud-based services are more streamlined and less expensive to operate, but accurately budgeting for the upfront time and resources of a cloud payment migration is challenging due to the many unknowns. Careful attention to planning is critical for a realistic cost assessment.
2. Underestimating the amount of prework.
The cloud promises to reduce complexity but getting to that point takes a thoughtful migration plan that’s complete and doesn’t skimp on details. What steps will be taken to ensure there’s no disruption to clients? Which applications make sense to retain and manage in-house, and which can be leveraged as payments as a service? For instance, fund disbursements for a retail consumer bank that administers 529 plans are typically a low-volume service for which cloud automation is a great fit, replacing paper checks with significantly less costly cloud-based payments.
But when it comes to payments as a service, managing risk and ensuring value also come into play. Wire transfers might appear to be good candidates for migration to cloud payments, but if most of the bank’s transfers are for high net worth individuals with equally high customer lifetime value, then the transfers may require levels of personalized service best handled with an on-premise platform rather than in the cloud. A well thought out strategy that addresses all impacts and value opportunities helps bank leaders avoid the unintended consequences that keep them awake at night.
3. Failure to prioritize.
A payments migration needs to be phased in a way that provides strategic competitive advantage. Setting priorities is key. For example, a bank may choose to align its payments migration with a specific strategy, such as a planned de-emphasis on branch offices. Another approach is to migrate the costliest payment applications first. Some banks may reserve cloud adoption for when they’re ready to add new payments capabilities.
Each bank’s path to cloud payments is nuanced, yet there’s often a feeling among banking leaders that moving to the cloud is an all-or-nothing proposition. That is, payments are either entirely cloud-based or all on premise. A more realistic goal is to craft a migration roadmap for a hybrid environment that accommodates both types of infrastructure for the near future, and to then prioritize and phase the payments migration in a way that makes strategic sense.
4. Testing in a dissimilar environment.
Replicating legacy operating environments for testing is expensive, so it’s not uncommon for banks to settle on environments that are similar but not identical — though the variation often leads to production environment errors that can derail cloud migration efforts. Performance falls short of expectations, typically due to the tangle of payment applications resulting from years of mergers and acquisitions.
For example, post-merger banking platforms often utilize more than one legacy payment hub, and there’s little chance that a bank’s current IT staff fully understands or can predict the unintended consequences for the hubs when making changes to the platform. Don’t fret over creating the perfect testing environment. Rather, build an environment that’s as close as possible.
By avoiding these common missteps, payment providers can reap the benefits of a simplified, modern infrastructure and application environment and minimize the risks.
Rustin “Rusty” Carpenter leads payments solutions within Cognizant’s Banking & Financial Services’ Commercial Industry Solutions Group (ISG). In this role, he works with group leaders and client-facing teams to elevate Cognizant’s client relevance, industry expertise and challenge-solving capabilities. Over his career, he has developed deep and broad expertise in payments and the emerging alternative and digital/mobile payments arenas. He is a frequent speaker on these topics at conferences worldwide and serves as a board advisor to fin-techs in all areas of payments and fraud prevention/mitigation.
Carpenter most recently was Head of Sales & Service, NA for ABCorp. Previously, he ran the Instant Issuance business for North America at Entrust Datacard; served as COO for Certegy Check Services, N.A.; was General Manager, NA for American Express Corporate Services; and completed multiple assignments at Andersen Worldwide and Dun & Bradstreet. Rustin has a Bachelor of Arts degree from Denison University and an MBA in finance from Rutgers Graduate School of Management. He can be reached at Rustin.Carpenter@cognizant.com
“An Introduction to Dew Computing: Definition, Concept and Implications – IEEE Journals & Magazine”. IEEE Access. 6: 723–737. doi:10.1109/ACCESS.2017.2775042. S2CID 3324933.ntazerolghaem, Ahmadreza; Yaghmaee, Mohammad Hossein; Leon-Garcia, Alberto (September 2020). “Green Cloud Multimedia Networking: NFV/SDN Based Energy-Efficient Resource Allocation”.
IEEE Transactions on Green Communications and Networking. 4 (3): 873–889. doi:10.1109/TGCN.2020.2982821. ISSN 2473-2400. S2CID 216188024.“Where’s The Rub: Cloud Computing’s Hidden Costs”. 2014-02-27. Retrieved 2014-07-14“What is Cloud Computing?”. Amazon Web Services. 2013-03-19. Retrieved 2013-03-20.Baburajan, Rajani (2011-08-24). “The Rising Cloud Storage Market Opportunity Strengthens Vendors”. It.tmcnet.com. Retrieved 2011-12-02.
Oestreich, Ken (2010-11-15). “Converged Infrastructure”. CTO Forum. Thectoforum.com. Archived from the original on 2012-01-13. Retrieved 2011-12-02Ted Simpson, Jason Novak, Hands on Virtual Computing, 2017, ISBN 1337515744, p. 451Antonio Regalado (31 October 2011). “Who Coined ‘Cloud Computing’?”. Technology Review. MIT. Retrieved 31 July 2013.
“Internet History of 1970s | Internet History | Computer History Museum”. http://www.computerhistory.org.“National Science Foundation, “Diagram of CSNET,” 1981″.“What Is Cloud Computing?”. PCMAG. Retrieved 2020-02-24.AT&T (1993). “What Is The Cloud?”. Retrieved 2017-10-26.
You can think of our electronic meeting place as the Cloud. PersonaLink was built from the ground up to give handheld communicators and other devices easy access to a variety of services.
Steven Levy (April 1994). “Bill and Andy’s Excellent Adventure II”. Wired.White, J.E. “Network Specifications for Remote Job Entry and Remote Job Output Retrieval at UCSB”. tools.ietf.org. Retrieved 2016-03-21.“July, 1993 meeting report from the IP over ATM working group of the IETF”. CH: Switch. Archived from the original on 2012-07-10. Retrieved 2010-08-22.
Corbató, Fernando J. “An Experimental Time-Sharing System”. SJCC Proceedings. MIT. Archived from the original on 6 September 2009. Retrieved 3 July 2012.Levy, Steven (April 1994). “Bill and Andy’s Excellent Adventure II”. Wired.Levy, Steven (2014-05-23). “Tech Time Warp of the Week: Watch AT&T Invent Cloud Computing in 1994”. Wired.
AT&T and the film’s director, David Hoffman, pulled out the cloud metaphor–something that had long been used among networking and telecom types. […]
“Announcing Amazon Elastic Compute Cloud (Amazon EC2) – beta”. 24 August 2006. Retrieved 31 May 2014.Qian, Ling; Lou, Zhigou; Du, Yujian; Gou, Leitao. “Cloud Computing: An Overview”. researchgate.net. Retrieved 19 April 2021.“Introducing Google App Engine + our new blog”. Google Developer Blog. 2008-04-07. Retrieved 2017-03-07.“App Engine”. cloud.google.com. Retrieved 19 April 2021.
“Nebula Cloud Computing Platform: NASA”. Open Government at NASA. 2012-11-20. Retrieved 2020-11-15.Rochwerger, B.; Breitgand, D.; Levy, E.; Galis, A.; Nagin, K.; Llorente, I. M.; Montero, R.; Wolfsthal, Y.; Elmroth, E.; Caceres, J.; Ben-Yehuda, M.; Emmerich, W.; Galan, F. (2009). “The Reservoir model and architecture for open federated cloud computing”. IBM Journal of Research and Development. 53 (4): 4:1–4:11. doi:10.1147/JRD.2009.5429058.
Keep an eye on cloud computing, Amy Schurr, Network World, 2008-07-08, citing the Gartner report, “Cloud Computing Confusion Leads to Opportunity”. Retrieved 2009-09-11.Gartner (2008-08-18). “Gartner Says Worldwide IT Spending on Pace to Surpass Trillion in 2008”.“Cluster Exploratory (CluE) nsf08560”. http://www.nsf.gov.millions d’euros pour Andromède, le cloud souverain français – le Monde Informatique”. Archived from the original on 2011-10-23.
Hicks, Jacqueline. “‘Digital colonialism’: why some countries want to take control of their people’s data from Big Tech”. The Conversation.“Orange enterre Cloudwatt, qui fermera ses portes le 31 janvier 2020”. http://www.nextinpact.com. August 30, 2019.“Cloudwatt : Vie et mort du premier ” cloud souverain ” de la France”. 29 August 2019.
“Windows Azure General Availability”. The Official Microsoft Blog. Microsoft. 2010-02-01. Archived from the original on 2014-05-11. Retrieved 2015-05-03.Milita Datta (August 9, 2016). “Apache CloudStack vs. OpenStack: Which Is the Best?”. DZone · Cloud Zone.“OpenNebula vs OpenStack”. SoftwareInsider.[dead link]Kostantos, Konstantinos, et al. “OPEN-source IaaS fit for purpose: a
“Launch of IBM Smarter Computing”. Archived from the original on 20 April 2013. Retrieved 1 March 2011.Sparks, Evan (26 June 2017). “Nine Young Bankers Who Changed America: Thomas Sudman”. ABA Banking Journal. Retrieved 12 March 2019.Cronin, Mary J. (1997). Banking and Finance on the Internet, John Wiley and Sons. ISBN 0-471-29219-2 page 41 from Cronin, Mary J. (1998). Banking and Finance on the Internet. ISBN 9780471292197. Retrieved 2008-07-10.
“The Home Banking Dilemma”. Retrieved 2008-07-10.“Computer Giants Giving a Major Boost to Increased Use of Corporate Videotex”. Communications News. 1584. Retrieved 2008-07-10.https://philip.greenspun.com/blog/2018/03/30/shopping-and-banking-on-a-computer-network-in-the-1980s-minitel“Information Technology And The Banking Industry”. 2014-09-24. Retrieved 2019-11-30.
“History – About us – OP Group”.Veeraghanta, Murthy; Corporation, CEO of VSoft (2017-11-08). “Is Your Digital Banking Vendor Hurting Adoption Rates?”. The Financial Brand. Retrieved 2019-12-09.Rishi, Om Prakash (2017). Maximizing Business Performance and Efficiency Through Intelligent Systems. IGI Global. p. 169. ISBN 9781522522348.Prendergast, Gerald Paul Joseph (1992). Human interaction in service delivery and its relationship to disenchantment discontinuance in the diffusion of self-service technologies: a case study in retail banking (PDF) (PhD). Massey University. p. 121.
“British Move Fast in Home Banking”. New York Times. 2 January 1984. p. 39.“New banking services for personal customers (銀行等の個人向け新サービス)” (PDF). National Consumer Affairs Center of Japan. 2000-10-05. Retrieved 2019-03-20.PYMNTS (2015-01-20). “China’s First Online Bank Finally Launches”. PYMNTS.com. Retrieved 2019-09-12.“Westpac Group celebrates 20 years of Internet banking”. ARN. Retrieved 2019-09-23.
“ICICI bank completes 20 years of digital banking”. ICICI-Bank. Retrieved 2020-02-23.Mari, Angelica. “Brazil’s first online bank ramps up innovation”. ZDNet. Retrieved 2019-11-24.Werani, Thomas (2006), “Business-to-Business-Marketing”, Praxisorientiertes Business-to-Business-Marketing, Gabler, pp. 3–13, doi:10.1007/978-3-8349-9287-1_1, ISBN 978-3-8349-0346-4
http://www.sloveniatimes.com/more-than-900-000-use-online-banking-in-slovenia“Innovation in banking Archives”. BMO History.“ING DIRECT Canada: Our History”. web.archive.org. December 2, 2013.
Marketing Programs To Buy: