Bank app store part of community cloud developments

News Analysis

Bank app store part of community cloud developments

Karl Flinders

Community-based cloud services for banks, including an app store for financial services organisations, are being incubated on the Society for Worldwide Interbank Financial Telecommunication (Swift) network.

The 40-year-old shared messaging service, used by world banks to complete financial transactions, could offer the secure and reliable cloud platform that financial organisations are looking for.

While organisations in every sector weigh up their cloud options, Swift could offer massive cost savings for banks moving into the cloud.

The not-for-profit cooperative began in 1973, with 239 banks on board from the start. It provides a network that sends an average of 17 million financial transaction messages every day across 209 countries. About 8,000 financial services businesses use it. During 2010, it processed more than four billion financial transactions.

 

Developing cloud-based financial services

Kosta Peric, head of innovation at Swift, says his team, which is in constant contact with member organisations, is proposing Swift as a vehicle to provide cloud-based services. The team is currently experimenting with cloud-based offerings such as a financial services app store, identity management applications and mobile banking software.

The fact that the Swift network has spent the past 40 years completing highly secure transactions means the security fears typically associated with cloud computing are much reduced. Reliability is also more certain because Swift has had 99.999% uptime since launch and has never lost a message.

Peric says there have been discussions and experiments of a financial services app store that would sit on Swift's network and be available for all members. "Applications that Swift owns could be available, as well as those from third-party suppliers," he said.

He adds that Swift could also host applications to support the role of banks as digital identity guardians. As more and more services are available online, people are required to fill in forms every time they sign up for a service. But banks could become the guarantors of customers' identities.

 

Possibility of shared internet banking systems

Peric also described how banks currently face a decision over mobile banking platforms. Do they build their own unique systems or share one as a utility?

In the 1990s, banks all knew that customers would want to bank from home, so they all decided to build their own internet banking platforms.

Peric says banks invested heavily in them in the belief that they could differentiate, but as it turns out they do not offer differentiation. "They spent an enormous amount of money, but it does not add a lot of value. They could have established a shared service," he said, pointing out that banks in Belgium share an internet banking platform.

At a recent meeting with some of its member banks, Swift asked what the banks are planning for mobile banking platforms, whether they are going to do it themselves or share technology.

Celent analyst Gareth Lodge says there is a fine line between cooperation and competition and, as a result, Swift's community model could limit its potential in providing additional services. "There are two groups of banks: Those that will be 'me too' and will be prepared to share services, and those that will feel a community solution is too limiting," he said.

"If banks use the same platforms there will be no way to differentiate unless the supplier provides enough tools to allow them to do so," Lodge added.

He says there is an opportunity for a service provider such as Swift to become a "trusted cloud broker", and this kind of supplier will validate the services available in the cloud and check that suppliers are meeting service level agreements (SLAs). "Swift's advantage over [a provider] like Amazon is its 99.999% availability," he said.

James Martin, a veteran of IT within banks including Lehman Brothers and Lloyds TSB, says there is a boundary between the commoditised back-end and the bespoke front-end at banks. "I still have the feeling banks believe they can differentiate on things like websites, but if someone can push the boundary between commodity and bespoke by adding functionality to commodity services it could change this," he said.

Shared services and cloud computing are big buzzes in all sectors as organisations attempt to cut costs while improving performance. But banks could tap further into a 40-year-old shared service that overcomes some of the security and continuity fears associated with sharing services in the cloud. But Swift's community model may be the biggest hurdle as financial organisations increasingly look at their competitiveness as recovery beckons.


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