How banking is adapting to hybrid environments

The combination of public and private clouds brings not only business opportunities for banking but also new security challenges Hybrid environments, where data interaction between private and public clouds is secure, are becoming increasingly relevant, as the advance of open banking creates an opportunity to explore new collaborative business models. Countries such as Brazil, Mexico, Chile, and Colombia are moving at different speeds with the implementation of open banking models that will enable data portability and stimulate competition. New use cases are expected to emerge that include a broad set of products, including mortgages, loans, investments, and pensions. This global trend towards open data requires flexible and rapid responses from the banking industry, and its integration with different non-financial players. We must think about enabling hybrid environments, which combine public and private clouds, and are considered essential for the exchange of user consented information. This scenario requires banking to adapt to an open and collaborative structure that leaves behind the idea that financial records belong to a single entity.

THE BANKING AS A SERVICE OPPORTUNITY

According to the firm Forrester, 2022 will be the year in which open finance will change financial services—for good—mainly through embedded models. That is, by embedding banking products and services in mobile applications and third-party business processes. In this sense, Banking as a Service (BaaS) represents a profitable opportunity for banks willing to adapt to hybrid environments and redirect their digital strategy as third-party technology providers and as back-up regulatory support. Until a few years ago, opening bank data for consumption by other industries was unthinkable. Today, keeping it closed is not an option. Hybrid environments combine public clouds with shared infrastructure, private clouds, and on-premises resources to achieve the agility that an institution needs to be competitive. BaaS requires alliances at different levels and for financial institutions to become distributors for companies targeting different age or economic groups. As such, this trend becomes an opportunity for the expansion and scale of all those involved and the creation of a banking system that has a 360-degree impact and provides solutions to different enterprises or companies. For example, Brazil's BV Bank uses embedded finance to provide bank settlement services for the digital wallet offered by the loyalty program of Ultra, the country's second-largest fuel distributor. The bank also partnered with marketplace Portal Solar and became the exclusive financier for solar panel purchases through the portal. This approach expands the reach of financial institutions and adapts it to a hybrid environment of collaboration and integration. At the same time, banks make allies of other companies focused on segments that may not be among their traditional audiences.

SECURITY AS AN ASSET

Working in hybrid ecosystems requires a careful exchange of consumer consented data, so banks must guarantee the correct use of the information entrusted to them by their users. Security in the financial ecosystem is an invaluable asset for banks and customers as cybercrime and hacking continue to lurk. The US and Germany top the list of countries that received the most threats from cybercriminals in 2020, followed by Spain in third place, according to IronHack's list. Mexico ranks 12th globally and first in Latin America. This underlines the urgent need to create secure environments as open finance moves forward. Banks have the ability to capitalize on security standards through the development of robust technologies. In an information-sharing environment between public and private clouds, whoever can guarantee users that their data is protected will be at the front of the queue. In this sense, institutions can create secure "tunnels" to expose their APIs (application programming interfaces) outside the private corporate firewall and thereby reap the benefits of public clouds, to properly transport data without the risk of leaks. This hybrid environment requires banks to adapt to a heterogeneous scenario where they can leverage their resources and those of the ecosystem to expand business opportunities, while gaining a reputation as providers of financial data security.