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Ben Saunders

5 Killer Use Cases for AWS Outposts in Financial Services

The public cloud is a critical enabler of innovation in financial services, underpinning the rise of the challenger banks such as Monzo and Starling.

And the arrival of the Covid pandemic has not diminished banks’ desire to leverage the public cloud. Only in the cloud can they shift quick enough to support their customers in new ways (such as with Mortgage Holidays), establish cloud-native contact centres to support home working for their customer agents and generally look at cost inefficiencies and risky heritage applications across their IT landscape.

But! There are still occasions, at the present moment in time, where the public cloud doesn’t have all the answers.

Challenges such as low latency requirements and data sovereignty can often make financial institutions think twice about public cloud solutions.

To meet this challenge Amazon released AWS Outposts.

AWS Outposts is a service that brings the power of the public cloud to the on-premises data centre.

With higher level services such as EKS and EMR now available to be extended into the private data centres of financial institutions, barriers for innovation with public cloud appear to be all but removed.

In this blog, I’ll give a brief run down of AWS Outposts and give five killer use cases in financial services.

What Is AWS Outposts?

Cue shameless cut and paste from Amazon’s website. I may as well trust the experts!

According to AWS, “AWS Outposts is a fully managed service that extends AWS infrastructure, AWS services, APIs, and tools to virtually any datacenter, co-location space, or on-premises facility for a truly consistent hybrid experience. AWS Outposts is ideal for workloads that require low latency access to on-premises systems, local data processing, or local data storage”.

“AWS Outposts offers you the same AWS hardware infrastructure, services, APIs, and tools to build and run your applications on premises and in the cloud for a truly consistent hybrid experience. AWS compute, storage, database, and other services run locally on Outposts, and you can access the full range of AWS services available in the Region to build, manage, and scale your on-premises applications using familiar AWS services and tools”.

So considering the above, what are some of the use cases for AWS Outposts across financial services? I’ve listed some initial considerations below.

5 Killer Use Cases for AWS Outposts in Financial Services

1. Utilise Advanced Cloud-Native Services While Fulfilling Data Residency Requirements

There is now an opportunity for financial institutions to leverage the innovation capabilities of AWS, whilst adhering to data sovereignty requirements.

AWS is expanding its global data centre footprint year-on year, in an accelerated manner. As an example, in 2020 they deployed a new region in Milan, Italy. However, there are countries such as Switzerland, the United Arab Emirates, Turkey and Saudi Arabia where data sovereignty requirements are incredibly stringent and require all financially sensitive data to remain within that country's jurisdiction.

With services like EKS being made broadly available, organisations could explore ways to lower their infrastructure operational costs and maintenance overheads by moving heritage applications to a container-based ecosystem and prepare for a low-friction migration to an AWS region, should one become online in their country over time.

In addition, core AWS services such as S3 and RDS can provide local and compliant data storage capabilities. When combined with EMR these services could provide the backbone of cloud native payments capabilities to support faster, in-region processing, with advanced analytics and fraud detection services.

2. Supporting Low Latency Trading Systems

Use AWS Outposts to greatly reduce physical proximity and generate competitive advantage, while using cloud-native grid compute and risk analytics.

The one thing that never ceases to amaze me about AWS is the speed of its service across the globe. That said, within some of the financial institutions I’ve dealt with there is scepticism about low-latency, high frequency systems being hosted too far away from exchanges when hosted in the cloud.

There is often a perception that this physical distance could impinge on a bank’s ability to respond to market fluctuations faster than their competitors, by making multiple hops from the Exchange, to the customer’s corporate data centre and then subsequently onto AWS and back again.

Now there are very real opportunities to deploy AWS Outposts solutions into the Exchanges themselves, closing the physical proximity to a few metres and generating milliseconds of competitive edge. All whilst being able to make use of dynamically scaling solutions across High Performance Compute resources, to quantify market risk and provide regulatory evidence in-line with MiFID and FRTB requirements. The later i particular, if combined with a Compliance as Code approach.

3. Simplifying and De-risking Data Migration

Outposts can greatly simplify and de-risk your cloud migration, negating the risk around complex all-out migrations.

In 2019, then-Governor of the Bank of England, Mark Carney, commented that 30% of the UK’s banking and payments estate resides on cloud-based services.

That means a whopping 70% of the UK’s banking infrastructure is still running on-premises, most of which sits on the mainframe. (Contino can help you liberate that payment data, as an FYI!).

But modernising your heritage banking infrastructure is a costly, risky exercise.

There are a few different options: building a net new operating brand like RBS attempted with BO, uplifting what already exists, rearchitecting from the ground up or applying sticky tape to keep you going for another few years. Though once you’ve built that net new banking estate, migrating and cutting over customers' current accounts can always be a big challenge as we’ve seen across the industry in the last few years.

Amazon already provides data migration services via its Amazon Snow family, specifically Snowmobile for petabyte scale migration needs. However, with Outposts, there is a counter case to state that your data migration effort could be simplified and de-risked to an extent, when you are hopping from one rack to another in your own data centre. Particularly when you have millions of current accounts to migrate to a net new platform. It might just give your Chief Risk Officer further comfort if the target systems are still hosted in your data centres boundaries and there is just no tangible movement around their risk appetite.

4. Creating a Bank-in-a-Box

AWS Outposts contains all the key services to establish a cloud-native ‘bank-in-a-box’ within your own data centre.

A quick analysis of the services made available by Amazon on Outposts strikes a sound balance between innovation needs (EMR, EKS) and more traditional compute resources (EC2, S3, RDS). A full list of services and features can be found HERE.

I wrote earlier around building net new banking brands to support the development of propositions and acquire market share from competitors. This has proven to be a mixed bag for some of the more traditional bricks and mortar banks. However, from a technical point of view all of the key services that you would need to establish a bank-in-a-box offering exist within AWS Outposts. Namely:

  • EKS or ECS to build out APIs that support both core banking processes and regulatory driven Open Banking requirements
  • RDS to support the storing of customer data sets and account data
  • EMR to drive modern and accelerated payments reconciliation and shift away from traditional batch driven processes
  • EC2 for provisioning supporting IaaS requirements where gaps exist across the Outposts service set and you have no option but to build your own infrastructure

There is nothing technical that is now preventing digitally-native banks from entering emerging markets where AWS regions are not yet established. You’ll see that I say nothing technical…because there are still political sensitivities around securing a banking license in a new geographic entity. So that business case really has to stack up.

Furthermore, across Capital Markets there are opportunities for Proprietary Trading Service (PTS) providers to deploy localised managed SaaS offerings of their systems to enter new markets in a similar vein where data sovereignty is a major requirement.

5. Enabling a Unified Control Plane

Use AWS Outposts to simplify and standardize elements of a hybrid approach to cloud via a unified control plane.

Siloed business units and years of acquisitions and mergers have led to disparate banking systems and, as a consequence, differing technology stacks and development practices across their estates. What the payments team uses for deploying application changes and managing infrastructure can be very different to those across the mortgages domain!

Learning new skills across the cloud domain, is a challenging undertaking. Particularly if you have a strategy where your organisation is happy for systems of engagement to reside in the public cloud, yet has a posture of requiring systems of record to remain “on-premise”.

This requires engineers to maintain dual practices across heritage systems, toolchains and processes, whilst also embarking on the journey of understanding cloud and DevOps orientated delivery.

Over time, if financial institutions continue to apply a hybrid cloud model for both regulatory and risk management purposes then having a unified control plane for deploying new and administering existing banking systems in a cloud environment will bring standardization, simplification and one would hope cost reduction.

Closing Words

In the early part of my career, I spent many years deploying containerised data centres across the oil and gas industry. These weren’t containerised data centres as we consider them today! But very similar solutions to those provided by AWS Outposts with pre-installed compute, network and storage to support critical PCN systems, whereby if there was a disruption in service, it was often a matter of life or death.

Whilst I am not saying that Outposts is a “do-or-die” service provided by AWS, it certainly addresses real problems across financial services. The industry has, on occasion, been constrained in its adoption of public cloud owing to data sovereignty regulations and low latency requirements specifically. There are also some softer edge cases, that can support the implementation of Outposts in traditional banking institutions should there be no movement in the CRO’s appetite for public cloud.

As a certified Amazon Web Services Outposts Ready Partner, should you have more questions about Outposts and how it could be applied in your organisation then feel free to reach out.

Thanks for reading!


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