Cloud computing is a hybrid technology which is used in banks for various functions including treasury management. It refers to deploying and managing the banking infrastructure, platforms, applications etc., without any dedicated physical servers or platforms on-premises. Treasury systems too have recognized its importance and many leading solution providers offer both on-premises as well as cloud solution. Many such vendors offer cloud migration as a service during a version upgrade.
Why Cloud Technology?
Cloud treasury management helps to achieve cost reduction, focus on better control, ensure regulatory compliance, and diversify and scale offerings. The high demand for cloud infrastructure has resulted in a significant rise in energy usage, which in turn has considerably increased the carbon footprint of the environment. Green cloud computing is the solution for reducing the earth’s carbon footprint and promoting environmental sustainability. All major public cloud providers have incorporated renewable energy resources for operating their data centers as a part of a drive to deploy green cloud computing.
Cloud computing doesn’t only apply to infrastructure. Companies that do not want to maintain an application server, development environment and/or run the application themselves on-premises have resorted to the cloud under PaaS, SaaS models. Running treasury applications in modern, dynamic environments such as public, private, and hybrid clouds is a major challenge with high expectations from banking organizations.
The rising demand for cloud infrastructure has resulted in a significant rise in energy usage. This quest for power has considerably increased the carbon footprint of the environment.
The Impact of Cloud Computing on Treasury Systems
Cloud computing has changed the working complexity of traditional treasury systems. It has been the solution to the problems faced by the corporate treasuries with the high volatility in the market, increased cybersecurity risk, and remote working environment. Many treasury systems are turning to digital technologies to keep up with the fast-paced digital transformation.
- As an example, Finastra’s (Summit, Opics), Murex (MX.3) are the treasury systems which had adopted cloud migration strategies to improve operational efficiency and client servicing
- Opics cloud journey started from version 4.8 onwards
- Murex’s cloud journey, started back in 2017, has been delivering value incrementally, making the leverage of IaaS (Infrastructure as–a-service) easier and more attractive for MX.3
- Summit provides traders, back-office users, and risk managers with user-friendly data manipulation and intuitive tools to navigate applications and windows. Summit Cloud migration strategies are available from summit versions 6.2+ onwards.
Cloud Migration Strategy
Re-hosting is the quickest cloud migration strategy where the complete transfer of existing infrastructure to a cloud service platform can be done (Infrastructure-as-a-service). It is also known as the 'lift and shift' strategy. This approach is easy and very cost-effective for treasury systems as there are no significant changes in the application architecture involved.
Re-hosting strategy on Summit
Summit treasury system cloud migration follows the re-hosting strategy where the Windows Database Oracle or SQL Server Development machine are effectively ‘lifted’ from the Summit’s current architecture (on-premises) and ‘shifted’ to target architecture (Re-hosting) virtual servers with compute products such as RHEL (Red Hat Enterprise Linux) for Summit app Oracle/SQL Server on VM or DBaaS (AWS RDS for Oracle, Azure SQL).
Target architecture also includes Summit 6.3 upgrade, deployment with Kubernetes, container services and registry DBaaS(Database as-a-service), monitoring tools, and virtual desktop infrastructure. Summit can be delivered as five docker images and one Helm chart for running on Kubernetes.
- Summit-native: Contains Summit binaries. This image is used by all Summit applications that require binaries. For example, RTS, axis2, ft_middle_ws, and so on.
- Summit-generated, Summit-sns(summit naming service),Summit-swiftadapter: Contains Summit web application and exposes the endpoint that will be used by other services.
- Summit-clickonce: Contains the ClickOnce deployment. Install the extensions and any additional third-party software by creating a client-specific Docker image named summit-client-native on top of the Summit native images
Benefits of Cloud-based Strategy in Treasury Systems
- Regulatory compliance
Cloud compliance ensures that cloud computing services meet compliance requirements. Computing services owned by third-party providers, such as Amazon Web Services or Microsoft Azure strive to ensure that their platforms and services are compliant so that the regulatory compliance can be made easy for banks.
- Easier integration and easing the upgrades
It can be easily integrated and deployed with all the third-party services of the treasury banking system, which reduces the time consumption and effort of the bankers and customers. The product stays close to the target version rolled out.
- Portfolio rationalization and cost reduction
Cloud rationalization in a bank is the identification of applications that are required for optimum business performance. Portfolio rationalization in cloud reduces legacy technical debt with microservices architecture for flexibility and dependency reduction. Cloud providers offering pay-as-you-use models allow payment only for the capacity being used. Adoption of cloud computing can lead to significant cost reduction and savings for banks.
- Reduce TCO
The total cost of ownership in banks is typically reduced by more than 20% in case of treasury systems across infrastructure, platform, and application areas.
- Easier to build extensions
The bank can use the extension framework development platform that allows building any data-powered application, trading reports, and workflow.
- Cloud security and business continuity
Leading cloud service providers considerably offer security requirements such as two-factor authorization (2FA), security tokens, VPNs, firewall services, and data encryption to avoid potential threats that lead to data protection of treasury systems without any risk. Business continuity of treasury systems in a bank is maintained by using the available DR (Disaster Recovery) options provided by cloud service providers.
Treasury systems are transforming from on-premises to the cloud very quickly while building and managing modern and cloud-native applications. Finastra Summit treasury system is an example. Kubernetes is one of the solutions that is open-sourced and supports building and deploying cloud-native apps with complete orchestration. Hence it can be used for treasury applications to cloud migration.
The COVID-19 pandemic has made cloud adoption more of a mandate than a choice for banking organizations to transform their application models and swiftly adjust to a new normal way of operating.