Cloud-native adoption in financial services

The business agility imperative

With the economies of many countries heading towards recession, increasing regulations, growing security threats and increasing costs, financial services firms need practical solutions, now more than ever.

Many of the financial technology firms (‘fintechs’) and mobile app-based challenger banks have taken advantage of modern application architectures and DevOps practices that are associated with cloud native technologies. Monzo Bank, one of the earliest app-based challenger banks in the UK, built a microservices core banking platform enabled by Kubernetes delivering business growth with a lower cost base. 

Cloud-native mindset

Financial institutions are increasingly faced with the need for agility and business velocity to keep pace with changing market conditions, increased customer expectations while satisfying all the regulatory and compliance requirements, security specifications and corporate standards. This requires financial firms to adopt an application development approach that shall provide the capability to roll-out new applications and services to meet customer demands at speed and a more cost-effective base for enterprise technology. Cloud-native development strategy provides enterprises the competitive advantage not only when developing new applications but also when financial institutions have to refactor or reachitect an existing application to extend functionality of legacy applications.

One does need to acknowledge that cloud-native application development is more than just architecting enterprise applications based on modular microservices architecture, application programming interfaces (APIs), DevOps and continuous integration/continuous development (CI/CD). It is about the entire software development lifecycle encompassing people, process and technology.

Containerisation

Container technology has made it easier to move applications and workloads between clouds and has brought about a step-change in virtualisation technology providing almost equivalent levels of resource isolation as a traditional hypervisor with considerable opportunities to improve agility, efficiency, speed, and manageability within IT environments. Containerisation enables rapid deployment and updating of applications.

Kubernetes, or K8s for short, is an open-source container-orchestration system for deploying, monitoring and managing apps and services across clouds. It was originally designed by Google and is now maintained by the Cloud Native Computing Foundation (CNCF). The technology has emerged as a leading choice for organisations looking to build their multi-cloud environments. All public clouds have also adopted Kubernetes and offer their own distributions, such as Amazon Elastic Kubernetes Service for Kubernetes, Google Kubernetes Engine and Azure Kubernetes Service.

Cloud strategy for financial services

Unlike Monzo, which wrote its back-end in microservices, established financial services firms will need to architect hybrid applications with cloud-native front-ends running either in the cloud, in their data centers, or both, and connecting to back-end services running in the data center. A hybrid cloud architecture is one that combines the usage of a number of public and private cloud services with orchestration between the two platforms. A hybrid cloud architecture shall allow the financial institutions to use a public cloud service to host frontend applications, while relying on a private cloud for storing sensitive data that they would not want on public cloud storage.

As financial institutions are transforming and moving towards customer-centric business models,  cloud-native development becomes an important element of digital strategy enabling finservs to leverage open source platforms, frameworks and tools to build secure applications, deploy and integrate across cloud infrastructure. 

Focus on core business

At virtual KubeCon + CloudNativeCon Europe 2020, Monzo’s platform engineers shared the learnings and challenges of self-hosting Kubernetes which was guided by regulatory constraints at the time when Monzo built their platforms. One key takeaway for all was that managing and running own kubernetes clusters can be a huge operational overhead. Managed K8s is an option that enterprises should be considering as part of their cloud deployment strategy.

Experience suggests that enterprises are able to accelerate their cloud-native journey by having the right tools and a strong partner ecosystem. Canonical – the publisher of Ubuntu, delivers pure upstream Kubernetes tested across the widest range of clouds — from public clouds to private data centres, from bare metal to virtualised infrastructure. 

In summary, by adopting cloud-native application development, financial institutions can quickly modify existing products, get to market faster and provide innovative products and services to customers and thus gain competitive advantage.