Vladimir Gerasimov - stock.adobe
As business and regulatory requirements increase, London-based challenger bank OakNorth is further evolving its cloud computing setup to increase resilience and enable use of multiple suppliers.
The company claims to be the first bank to be fully cloud-hosted, having started the deployment of infrastructure provided by Amazon Web Services (AWS) two years ago, which paved the way for other challenger banks such as Starling, Monzo and Metro Bank.
According to OakNorth’s chief operating officer (COO), Amir Nooriala, in 2017 – the bank’s second full year of operation – pre-tax profits reached £10.6m and accrued losses were repaid. Cloud, he says, is a crucial element to keeping IT costs down and plays a key part in helping the bank achieve its overall financial targets.
“All of our systems are running on the cloud and we are very proud of the fact that we were the first UK bank to be fully cloud-hosted,” Nooriala adds.
OakNorth’s software portfolio – including in-house platforms to off-the-shelf software, and everything from ancillary services such as customer relationship management and email platforms to the core banking platform – sits entirely on the AWS setup.
To further develop its cloud deployment, the company is now nearing the end of a multi-cloud resilience proof of concept which aims to test the systems environment with other suppliers.
“We want to continue innovating on cloud deployment and we hope to be the first in the UK to [adopt a multi-cloud approach] too,” says Nooriala.
The company also wants to continue to hire staff to further boost its cloud expertise, and has plans to bring in more employees to expand its IT department and particularly cloud expertise, which, according to Nooriala, can currently “be counted on one hand”.
“We have in-house IT staff that build platforms for us and support them, we have vendors we use, and then full vendor platforms where we integrate the APIs [application programming interfaces]. In terms of people who specifically support our cloud infrastructure, it’s a highly experienced but very light team,” the COO says.
“We’re simply not encumbered by legacy platforms and infrastructure, and only have one of every system we need with maximum automation within,” he adds.
Because OakNorth always knew it wanted to be fully cloud-hosted, the executive points out that it built the team from scratch around this and specifically hired people who had cloud expertise.
“I’d also say that hiring people to do a cloud project, let alone work for a bank that wanted to be the first in the UK that is totally cloud-based, was an easy sell, and people continue to proactively reach out to us too as a result,” he adds.
OakNorth’s IT strategy differs slightly from many of its peers, according to Nooriala. Splitting competition into incumbents and challengers, the executive says while traditional banks are very focused on cost reduction and systems consolidation, many fellow challengers are focusing on scale rather than profit.
“This is a very US-like model, where you gain maximum market share while burning cash and then look to monetise your user base at a later stage,” he says.
“We very much view our technology with a commercial lens: we leverage technologies such as big data and machine learning to dramatically improve the borrowing experience for SMEs small to medium-sized enterprises] and reduce the typical transaction time for a loan from months to weeks. This gives us a competitive advantage,” he says.
“On the savings and deposits side, we use technology to improve processes internally. The savings we make from this increased efficiency can then be passed on to our customers in the form of higher interest rates.”
“All of our systems are running on the cloud and we are very proud of the fact that we were the first UK bank to be fully cloud-hosted”
Amir Nooriala, OakNorth
Cloud plays a central role in that business context today, but it wasn’t always like that. When the firm obtained its banking licence in March 2015, the plan was to launch with systems entirely off-premise, however the plan had to change since there was no regulatory policy in place.
When OakNorth launched, it did so with Mambu, knowing that it was a system that could be easily migrated to the cloud, according to Nooriala. Conversations with the authorities about moving to the cloud picked up again, and six months later, it worked with the Financial Conduct Authority (FCA) again and AWS to carry out the migration.
“The FCA was very supportive to us as pioneers, on policy items around data protection, access to data, security and business continuity,” he says.
The latter aspect is one of the key benefits of the cloud migration, which the bank completed in May 2016. According to Nooriala, the OakNorth has been able to rebuild its entire core banking platform in a new location in five hours.
“This is the kind of figure that large, incumbent banks dream of, but because we’re fully cloud-hosted, we’re able to make it a reality,” he says.
Being flexible to cater for business and customer demands, as well as being able to implement at speed, are other key upsides of cloud, the executive points out. “We’re able to adapt to the needs of our customers, offering solutions where others can’t, and move away from the ‘computer says no’ mentality that plagues the industry,” he says.
Cloud has also enabled the company to expand its testing capability, but also empowered and unleashed creativity within the IT department, which means the bank can run prototypes and proofs-of-concept a lot more efficiently.
“[Staff] are able to benefit from creative freedom at a low cost because the cost of projects not progressing has been significantly reduced,” the COO says.
“The team can now test and experiment with new products and services, and if it doesn’t work, they can just turn it off and there are no assets costing money, or any risk that the usability or security of our platform will be jeopardised.”
One of the key reasons why OakNorth chose to work with Amazon Web Services was access to computing power and scale it wouldn’t be able to get otherwise, but another important motivation is the fact that many of its systems only supported AWS as a cloud infrastructure supplier.
Looking back at the cloud journey at the company so far and the lessons learned, Nooriala says that due to the nature of cloud computing, traditional supplier engagement models can be “misaligned” with a cloud service provider – and that can be a struggle to figure out how to interact or follow existing processes.
Amir Nooriala, OakNorth
“Having gone through this process, we think it is important to pick a provider that uses simple contract structures that are easy to understand and update,” the executive says.
Detailed due diligence on all providers is also essential for the companies wishing to migrate to the cloud, according to Nooriala. This includes looking into factors such as location of services, service performance and usability, data location, processing, portability and recovery, security, business continuity, rights for audit and for access by regulators. Supplier reputation and existing customer references are other key points to consider.
Despite the fact that cloud service providers have been improving their data privacy offerings, the executive says it is also vital to understand how responsibility for data privacy obligations will be allocated between the final client and the provider, including who is responsible for data security.
“Typically, providers have been more willing to take on responsibility for network integrity, while trying to steer clear of obligations in relation to security of the data itself,” he says.
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