November 07, 2011

Most big financial services companies have been eager to tout their own private clouds, but only a few have made a large move to public cloud offerings, citing security and compliance concerns. However, Amazon Web Services, the division of Amazon that runs its cloud computing offering, has been making inroads in the highly regulated financial services industry.

Recently, Wall Street & Technology caught up with Adam Selipsky, vice president of AWS, to discuss how financial services companies are approaching public cloud and how firms' attitudes toward cloud security are shifting.

WS&T: Most large financial services companies have already established internal "private" cloud architectures. However, most have not moved to external "public" cloud offerings. Why is that?

Adam Selipsky, Vice President, Amazon Web Services: What we've found in working with financial institutions and other large enterprises is that private cloud is often the term that is being used by vendors who are selling virtualization of existing on-premises technology. Virtualization, and many other technologies being termed private clouds, lacks many of the central benefits of the cloud.

For example, with a private cloud, organizations must still invest in capital expenditures and must invest enough to handle rapid demand if needed. This means that there is often low utilization of assets and waste for large portions of the year. Additionally, many of these enterprises are finding that with a private cloud they are still stuck managing the muck of technology infrastructure, which really doesn't differentiate their businesses.

AWS is working with a growing number of forward-leaning financial services institutions who've realized that there is a good deal of efficiency, cost savings and innovation possible in the cloud. For some, there can be a psychological hurdle involved in making the first leap into the cloud, but once organizations learn about AWS security practices, the amount of control they have in the cloud and the cost savings that can be achieved, they quickly begin offloading more of their technology infrastructure to AWS.

Data intensive processing is a common early uses case for financial services customers, including risk analysis, algorithm and model testing and financial simulations. Web and mobile applications and storage and content distribution are also common use cases.

WS&T: Does the willingness to move to public cloud differ by size of bank? Are mid-size or smaller banks more likely to move to the cloud?

Selipsky: We've not found that the size of the bank is a big factor in determining the rate of adoption. AWS has financial institutions of all sizes leveraging the services. For example, Bankinter, one of Spain's five largest banks, has adopted AWS for their credit risk simulations. Bankinter uses HPC on AWS to run credit risk simulations to evaluate the financial health of their clients. By incorporating AWS into their IT environment, Bankinter has managed to take their average time for running simulations from 23 hours to 20 minutes.

UniCredit, is a pan European bank based in Italy with approximately 40 million customers and 9,500 branches in 22 countries making Unicredit the largest international banking network in the Central and Eastern Europe. Unicredit worked with AWS partner, Scube NewMedia, to create an advanced web and mobile application built entirely on AWS. The service matches proprietary business data with geographic information to create UniCredit Locator, which is an application which helps customers find the financial institution's offices, branches, and ATMs.

NASDAQ is a long time user of AWS. NASDAQ has created a tool called the NASDAQ Market Replay, which is a powerful analysis tool, allowing users to view the consolidated order book and trade data for NASDAQ, NYSE and other regional exchange-listed securities at any point in time. Investors can use Market Replay to help validate best execution and Reg NMS compliance. Brokers and traders can use the tool to reconstruct the events around their trade to determine whether there was a missed opportunity or an unforeseen event. Brokers can send clients a NASDAQ-validated screen shot of the moment their particular trade occurred, confirming the quality of the execution and reducing the number of customer inquiries.

The U.S Department of the Treasury has built on AWS. has the modern capabilities expected in such a critical, public-facing web channel and allows the agency to better communicate with the public in a more open and transparent manner.