Powering Finance: The Digital Transformation

Since the installation of the first ATM in 1967 and the introduction of digital trading on the Nasdaq exchange in New York in 1971, the powering finance services industry has been at the forefront of technical innovation. However, technology remained a back-office function for decades, serving the traders and executives who made the decisions.

Today, however, clients demand flawless digital experiences, and regulators need 24/7 access to market data, pushing technology to the top of financial organizations’ lists of priorities, like powering finance. For insurers, banks, and asset managers alike, the IT leaders and their teams who can achieve these requirements have become some of the most sought-after employees.

“Technology is now [about] how our clients experience the bank, whether it’s through an app or digital service,” says Mike Dargan, group chief digital and information officer and executive board member at UBS. “As a natural consequence, tech is now an integral part of our business—it has a seat at the table and is part of our firm’s strategy.” 

A cloud-based future of Powering Finance

Cloud computing is the foundation for the financial services sector’s transformation to an “on-demand” data and services economy, where businesses pay specialized providers for storage and infrastructure as needed. The cloud service divisions of Microsoft, Google, and Amazon are usually these experts. Only these tech businesses have the global networks of massive data centers that are necessary to handle the finance industry’s expanding computing needs.

“If you look at all the new requirements coming from central banks, governments, or even investors, financial services companies don’t have the data storage capacity to meet the needs,” says Scott Guthrie, executive vice president of the Microsoft Cloud + AI Group.

In the 1970s, when banks first started using technology, they created their infrastructure and commonly installed servers in their data centers. The conventional approach performed well when compute demand was somewhat uniform. However, even if excess capacity was usually unnecessary, banks had to make sure that they maintained expansion during moments of high market volatility when demand for processing power increased.

The idea that if a bank’s demand for computing power surpasses its typical level, its cloud partners can immediately provide additional capacity and only charge for the time it is used is usually discussed, according to Dargan. Because spare capacity is aggregated for the entire industry at the level of the cloud services providers rather than maintained by each enterprise, this not only results in cost savings but also lowers carbon emissions. Because cloud service companies have some data centers that can support one another, reliability and uptime are also increased. With the transition to the cloud, UBS, according to Dargan, achieves above 99.999%, or sixth sigma availability across its estate. This transition is Powering Finance to achieve unprecedented reliability and scalability.

In addition to storage and infrastructure, cloud providers also provide platforms and tools for the creation of apps and services. UBS’s tech teams have switched from utilizing 50 different development tools since Dargan joined the company in 2016 to using UBS DevCloud, a single cloud-based service. UBS software engineers can easily write, test, and release code using a single tool thanks to an open ecosystem that is built on the public cloud. This enables them to produce products quickly and update them often.

In addition to storage and infrastructure, cloud providers also provide platforms and tools for the creation of apps and services. UBS’s tech teams have switched from utilizing 50 different development tools since Dargan joined the company in 2016 to using UBS DevCloud, a single cloud-based service. UBS software engineers can easily write, test, and release code using a single tool thanks to an open ecosystem that is built on the public cloud. This enables them to produce products quickly and update them often. Applying the same in our sector might change everything for our clients, according to Dargan. One of the primary forces behind the financial services industry’s adoption of cloud computing, according to Guthrie, was the desire to enhance customer service, sometimes in the face of competition from new, digital-only competitors. An early cause of movement to the cloud was financial services organizations trying to Powering Finance mobile or online, digital services to consumers.”

Cultural evolution of Powering Finance

Financial services firms’ transition to the cloud represents a substantial, generational change for a sector that led the way in the large-scale deployment of computing through in-house infrastructure. Naturally, that causes some level of caution.

“Finance often has the most sophisticated infrastructure teams of any industry, so the reaction [to transitioning to the cloud] was often ‘I’m sure our on-prem must be better than cloud,’” says Guthrie.

Transitioning gradually is essential for gaining trust. According to Guthrie, when Microsoft assists a customer with cloud migration, the business invests time in creating “guardrails” to make sure security is in place and code may only be deployed in particular domains. “If you spend the time upfront getting it right, then you can go faster every day afterward,” he says.

When Dargan joined UBS in 2016, between ten and five percent of its services were hosted in the cloud. More than 1,000 apps have been switched over, and he and his colleagues have raised that to half. According to him, the goal is to move two-thirds of apps to the cloud.

When adopting agile methods of working, skeleton products are quickly constructed from beginning to end and then distributed to users for feedback that guides future development. For huge financial organizations that typically specified every feature up front and planned multi-year release cycles, access to cloud-based dev-ops tools—a set of practices that mixes software development and IT operations—and automated testing is making such ways of working practices. To assist workers with the change, UBS has created an internal playbook, academy, and mentoring for its 13,000 employees.

Like Guthrie, Dargan advises a smooth shift with a focus on training and sufficient time to get used to new working methods. “Digital transformation has to be an evolution,” he says. “It is not a big bang.”

Staffing the change

Cloud engineers and migration professionals are in high demand due to the quick and widespread adoption of cloud services and the growing significance of technology. Dargan claims that this has led to “a struggle for talent” across all industries, not just in the financial services sector. Due to the dearth of individuals with the required experience, the competition is extremely intense. Guthrie agrees. “Finding someone with 10 years of cloud infrastructure experience is not possible, because some of these areas didn’t even exist 10 years ago,” he says.

Instead of depending solely on external hiring, both cloud service providers and financial service companies have launched internal training initiatives to overcome talent shortages. Technologists can advance through the UBS Distinguished Engineers framework, from “certified” to “fellow,” as they develop their expertise. According to Dargan, these certifications may be more highly valued than promotions or line-management chances because they demonstrate the holder has developed unique and highly marketable skills.

As engineers with cloud knowledge look for opportunities to work in sophisticated environments where they can quickly build and deliver code, the speed at which the cloud is being adopted may be another important recruitment and retention tool.

The desire of fintech to carve out a slice of the financial services revenue pie and client expectations for flawless digital experiences will probably increase the use of technology and cloud-based tools and services. Businesses need to figure out how to develop products quickly in the cloud, reduce infrastructure expenses, and recruit top engineers with cutting-edge working methods if they want to succeed. All of this was accomplished without changing the tools, personnel, or procedures that helped them become digital pioneers in the first place.

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