Cloud adoption builds essential agility into SBAB's banking model

While many industries have been adapting to the huge changes engendered by cloud and the emergence of cloud-native technologies, there have been some that have lagged behind.

Banks have been some of the last companies to adapt to the changes. There are a number of reasons for this. First of all, their history has been one of mergers and acquisitions as smaller banks have fallen by the wayside. This, of course, applies to many industries, but banks have been particularly active in this regard.

Then there’s the highly-regulated nature of the industry. There aren’t many industrial sectors with so many supervisory bodies monitoring activities - and the number of regulators is growing all the time.

But, perhaps most of all, there is the very nature of banking itself. The systems are well established and are not always easy to change. Look at the frequent banking shutdowns that have hit banks in the past few years - they can take hours (or even days) before things are back on an even keel.

The well-established banks are well aware of the danger posed by nimbler competitors nibbling away at their markets. But even younger banks have their baggage, thanks to the fast-moving nature of technology. Take Swedish bank, SBAB, as an example. Founded in 1985, it’s a veritable baby compared to some of Europe’s more venerable establishments but even striplings like SBAB are weighed down by legacy systems or by “a backpack full of heavy technological stuff” as CIO Klas Ljungkvist puts it.

The bank has battled its way against stiff competition to become the country’s fifth largest, albeit still some way behind Sweden’s big four established banks. In such a competitive environment, the bank is looking to deploy technology to try to make ground against the major players.

To that end, SBAB has looked to shift its legacy systems to an environment more conducive to modern banking systems and user demands, particularly as it started rolling out more customer-facing applications.

Stacking up

The bank’s chosen platform is OpenStack, a technology that has been widely adopted by carriers and service providers but has not been widely adopted by enterprises. However, the flexibility of the technology and the way it can be used as a platform for micro-services is highly appealing to SBAB.

The reason was not OpenStack itself but we needed to find a private compliant cloud provider, we’d have gone with anyone who met our needs, according to Ljungkvist. Well, anyone except Amazon:

It excluded AWS at the time, as we didn’t find them compliant enough.  As a bank, we have problems of jumping into public cloud solutions Because of banking regulations and GDPR. The scene is moving slowly and surely and we can trust public cloud providers but that wasn’t the case two years ago.

By using OpenStack, the bank believes it can shift from the legacy systems that were hindering its progress. The company had some COBOL in place, a remnant of its early days but that’s now on the way out.:

We’ve taken our first real step out of the COBOL system by launching unsecured loans into an SAP solution with corresponding micro-services running on top: so new loans are now in the OpenStack architecture. When we’ve completed all that, we’re going to move secured loans, and mortgages and other banking services.

SBAB is not planning to move a lot of the elements of the banking system to the OpenStack platform, says Ljungkvist:

The legacy and back-end standard systems that will remain are those that aren’t crucial for customers. We’re not going to focus so much on administration. One thing we have learned is that when we build new stuff, we’ll make it so it’s easier to de-commission and easier to upgrade. We’re hoping that this time we won’t build up a whole new pile of legacy so that, in 15 years time, we don’t have to go through another upgrade.

By deploying OpenStack, the bank can use containers to ensure that systems are continually kept running, he adds:

We run all services in container packs and when we launch something new, we add a  third container; when we see that it works we take out the old container and add another new one. So we can do this seamlessly, running alongside most of our legacy systems.

So far, so good, says Ljungkvist. The bank is now running more than 100 microservices on OpenStack but, in the near future, there are plans to install SBAB’s website, public APIs and customer service tool on the platform.

The implementation of OpenStack has not just been about the development of new customer-facing services but improving the way that existing services are handled. The bank is learning much from the way that it is handling these improvements, he adds:

Customers are appreciating the simplification of existing services as much as the new ones we’re offering. These will also form the basis for future innovation so we don’t have to do everything ourselves.

One of the examples of how OpenStack has changed the way that the bank works is in the way that it handles software releases. It used to be standard practice for these upgrades to lead to periods of downtime. It started slowly, with just a few fixes a month but, by the end of 2017, SBAB had a target of 280 released user services without downtime every month – it hit this in March. The target was raised to 400 – it hit this in October. It’s a sign of the greater sophistication and reliability of the system that the bank can keep running effectively while these changes are happening.

OpenStack as a technology still has some way to go before it gets wide acceptance within enterprises but the experience of SBAB shows that it has potential, even in the rigorous world of banking, concludes Ljungkvist:

We will need to be ahead of our compatriots. We’re on par at the moment. The big banks have lots of resources but also have the downside of being large, so they don’t move so quickly. We have to learn to be quick all over the pitch.