The criticality of cloud for fintechs: insights from IBM

Antler founders scale faster and more efficiently, backed by our truly global community that includes industry-leading companies. We are thrilled to collaborate with IBM to give our fintech founders access to world-class technology experts and cloud platforms.

Why is a cloud strategy so critical for fintechs and why can it spell success or failure for a startup? We sat down with Prakash Pattni, Managing Director—Digital Transformation, IBM Cloud for Financial Services, to learn more.

antler

Antler

The investor backing the world's most driven founders, from day zero to greatness. Enabling thousands of founders every year to launch and scale companies that move the world forward.

The 2020s have become the era of cloud. How is cloud revolutionizing the fintech industry?

The financial services industry is changing due to a convergence of new technologies and the evolving expectations of consumers, who now want convenient digital services in real time. To meet this expectation, financial institutions are shifting towards digital platform business models that are built on a foundation of cloud technology. It’s the essential building block of modern organizations, because through cloud platforms businesses can not only scale quickly but they can also leverage other exponential capabilities that power digital products and services, such as AI and automation.

Many fintechs today are cloud native businesses, which gives them the advantage of not needing to transform and replace cumbersome legacy IT environments from a previous era. They are born on the cloud and already have a digital platform business model, allowing them to be agile and quick in seizing new market opportunities and making it easier to form collaborations with other digital-first organizations. This has led to the emergence of new, disruptive ways of providing financial services, making it a very exciting time to be in fintech.

How does an effective cloud strategy drive innovation and growth for a fintech?

Given that cloud is the foundation for the future of business, having the right strategy for leveraging cloud is critical to success. We’re now seeing the next chapter of cloud emerging. This is characterized by growing awareness that one size does not fit all and that businesses—particularly in highly regulated industries like financial services—need a more tailored cloud solution that helps them overcome the friction of stringent security and regulatory requirements.

As fintechs grow in influence and value, regulators are taking a closer look at them and any risks they might introduce to the financial system. Strict compliance controls mean it can take as long as 18 months or more for a bank to onboard a fintech so they can start doing business, stymying huge opportunities for growth and innovation.

A key pillar of IBM’s strategy is focusing on industry-specific cloud solutions that help businesses in highly regulated sectors overcome this friction. In 2019, we developed IBM Cloud for Financial Services in collaboration with Bank of America as our first client. The platform now has an ecosystem of more than 125 technology partners and fintechs. They all benefit from automated security and compliance controls that are built into the platform’s code, which in turn helps to de-risk the entire industry supply chain while accelerating transactions.

This combination of a cloud platform designed for the industry and being part of an ecosystem of financial institutions, fintechs, and other technology providers is an effective cloud strategy for both fintechs and banks looking to modernize and grow quickly.

What's the number one mistake fintech founders make with their cloud strategy?

When cloud started becoming more prevalent, a lot of cloud-native startups that emerged started to run into problems as they tried to scale their business on generic cloud platforms. Factors such as being tied to proprietary solutions and not being able to seamlessly deploy workloads across different cloud environments as needed began to inhibit their growth. Moreover, generic cloud platforms aren’t designed to address the specific pain points that stand in the way of fintechs collaborating with banks, which are a major customer base.

Another issue we’ve seen across industries, not just with fintechs, is that in the rush to cloud-based operations, businesses have ended up with complex IT environments and supply chains made up of various different vendors and software providers that are not connected on a single platform. The disconnected nature of this digital supply chain opens up vulnerabilities that hostile actors can exploit with ransomware attacks.

Why does a fintech's success or failure hinge on working with the right cloud partner?

Having the wrong cloud configuration can be fatal in our increasingly digital world. Today, almost all organizations that use cloud have adopted a hybrid cloud model, which means they use a mix of public clouds and on-premises (private) clouds. This not only allows for more flexibility, but it’s also an essential requirement of regulators in critical industries such as financial services to mitigate the systemic risk that comes from over-reliance on one cloud vendor.

It’s therefore very important that fintechs work with a cloud partner that enables them to seamlessly operate a hybrid cloud model and work across multiple cloud environments, with different providers. IBM Cloud and IBM Cloud for Financial Services leverage Red Hat Open Shift, which allows companies to build an IT workload once and deploy it across any cloud—including cloud platforms from other providers.

A hybrid cloud model also provides a singular view of the whole IT environment, which makes it easier to detect and neutralize threats, wherever they appear in the system.

What steps should a business take to choose the right cloud partner and platform?

The first step is to be clear about what the business’s goals are. Cloud is part of the means to achieving those goals; migrating everything to the cloud should not be seen as an end goal in itself.

Once the objectives are clear, it’s about considering what cloud and general IT configuration is going to help achieve them.

If a fintech needs to be able to easily work with banks to be successful, then what do they need to have in place from a technology standpoint to enable that to happen smoothly and quickly?

If the fintech also needs to be able to collaborate with other partners such as technology providers, as well as banks, what kind of cloud provider and platform offers a partner ecosystem that facilitates that?  

Having access to the right skills is crucial to realize the full benefits of cloud. Does the fintech have those skills in-house or is it more cost-effective to work with a partner that can fill this gap?

In an industry like financial services, which has unique complexities and challenges, fintechs that work with a cloud partner with deep industry expertise and solutions tailored for the sector’s needs will have a clear advantage.

How is IBM supporting Antler fintech founders to help realize their full growth potential?

While fintechs focus on innovation, they cannot drive forward without adhering to the regulatory environments their clients operate in. This is where IBM is uniquely positioned to help fintechs become compliance-ready from the onset. 

The IBM Cloud for Financial Services leverages built-in security and compliance controls. These industry-informed controls—established by the IBM Financial Services Cloud Advisory Council’s network of CIOs, CTOs, regulators, and other experts from more than 80 financial institutions around the world—were designed to set a standard for the compliance-conscious industry.  

Through the IBM Cloud and IBM Cloud for Financial Services, fintechs also benefit from a suite of specialist AI-powered cloud software such as IBM Cloud Paks for Data, Automation and Security.

Together, these solutions allow fintechs and financial institutions to predict customer behaviors to enable greater personalization of offerings, automate compliance tasks, secure highly sensitive financial data and transactions, and modernize mission-critical workloads while adhering to security and compliance regulations.

Learn more about IBM’s cutting-edge cloud solutions.

Subscribe to our newsletter

Get the latest news and views from Antler’s global community

Thank you! Your submission has been received!
Oops! Something went wrong while submitting the form.

Must-read articles from Antler

Browse our collection of founder stories, industry insights and latest startup successes from Antler Australia

See articles
Insights
5 min read
The new generation of Nordic founders

The Nordics have produced some of the most successful tech unicorns in Europe—and the world—with Spotify and Klarna securing some of the highest valuations ever achieved by European tech founders. As the tech flywheel spins faster and faster in the region, Antler is excited to publish the largest study of tech founders in the Nordics ever conducted.

Founder Stories
5 min read
Manuel Schönfeld: The management consultant determined to save companies millions

Our content series "It All Starts with People" delves into the passions, motivations, and vision of the exceptional founders we have the privilege of partnering with around the world. Read the story of Manuel Schönfeld, founder and CEO of PowerX, on a mission to help businesses waste less energy and money while combatting what he calls "the largest threat to our planet since the meteor wiped out dinosaurs.”

Insights
5 min read
Build your transformational AI company with Antler

As AI technologies evolve at a breathtaking speed, founders have an unprecedented opportunity to leverage those tools to solve complex, meaningful, and pervasive problems. Antler is looking for the next wave of visionary founders committed to using AI to disrupt industries and improve how we live, work, and thrive as individuals, organizations, and economies.

Insights
5 min read
Under the hood: How Antler sources and assesses great founders

Our Window into Progress digital event series continues with "Under the Hood"—a deep dive into the rigor and scale that makes Antler unique as we source and assess tens of thousands of founders across six continents.

News
5 min read
Antler partners with Khazanah to launch in Malaysia

Antler is thrilled to announce our launch in Malaysia, headquartered in Kuala Lumpur and in partnership with Khazanah.

Insights
5 min read
The state of building today: Antler global perspectives

On the heels of publishing A Window into Progress—a global report that looks inside Antler, the world’s day zero investor—we are excited to present a digital event series offering deeper insights into our portfolio, investment approach, and unique views of the world. Our first event is "The State of Building Today," featuring perspectives on the state of VC and the startup ecosystems in Europe, the US, India, and Brazil.

Founder Stories
5 min read
Abraham Burak: The digital nomad delivering instant connectivity worldwide

Our content series "It All Starts with People" delves into the passions, motivations, and vision of the exceptional founders we have the privilege of partnering with around the world. Read the story of Abraham Burak and Bahadir Ozdemir, co-founders of Airalo, who are on a mission to make connectivity around the world accessible and affordable.

Insights
5 min read
Meet the new generation of European tech founders

As unicorns and later-stage companies are battered by the economic climate, the overall health of the European tech ecosystem looks stronger than ever, with more founders coming from big tech and unicorns to build new startups with significant growth potential. Dive into our report and get to know the new generation of European tech founders.