The Dutch pioneers who created cloud banking
Banking the Cloud: The Complete Story of Cloud Banking and Who Started It. By Chris Zadeh, Matthijs with Mary Curran-Hackett. Forbes Books. 364 pages, glossary and chronology but no index.
Cloud banking is the story of Ohpen, a fintech startup in Amsterdam that grew to become the world’s first cloud-based central banking system.
Like successful tech startups all over the place, he had a core team of very smart people who worked incredible hours for years. Many were unsuitable to some extent and did not fit into a traditional business or employment structure, but happily jumped in when needed regardless of job titles and figured out how to make things work. .
Chris Zadeh and Matthijs Aler started at BinckBank, an online finance company where they received basic training on fire suppression, from rescuing a stuck migration to a new version of basic software, to takeover of a project from a Romanian outsourcing company whose code did not work. At all.
They worked with a small team which they renewed to create Ohpen after BinckBank merged and became bureaucratic. The Ohpen team has developed a basic plan: scoping, governance, decision risk logs, meeting priorities, phases and structures. And they adopted a rule: never change the scope!
âWe have gained more experience in those eight years than most people have in their lifetime,â Zadeh said.
A big difference between tech companies and fintech companies is that fintechs operate in a highly regulated world and regulations are subject to change. Ohpen’s target customers were banks. Bankers are risk averse and often technologically ignorant, despite the fact that banks depend on technology.
Zadeh said that a bank executive told him the cloud was not secure, but he was unable to explain what the cloud was. This reflects an issue that Chris Skinner, a digital banking expert, has repeatedly complained about – bank boards don’t have enough, often don’t – tech experts despite their dependence on technology.
Writing on his blog The Finanser in June, Skinner argues for a banking tech team that looks a lot like Ohpen.
âUltimately, any bank with tens of thousands of developers, technologists and engineers should first ask the question: WHY? I don’t know why a bank today needs tens of thousands of developers, technologists and engineers. With APIs, Open Banking, cloud computing and more, a bank could probably run on just ten. You heard me: a bank with only ten engineers.
But they may need a lot of lawyers. It took Ohpen nine months to get a deal from Robeco (at the time a subsidiary of Rabobank), the Dutch Central Bank and AWS to get the bank’s approval in the cloud. Zadeh said AWS has been very helpful in gaining approval. It had to change its own audit rules to accommodate central bank regulators. Fortunately, everyone involved, including the regulator, knew that the cloud was essential for financial companies to operate with a modern platform that would save investors and depositors millions.
Bankers wanted to know if their data would reside in the EU because they didn’t want it to be within the grasp of US investigators and the long reach of the Patriot Act and the USA Freedom Act.
Fortunately for Europeans, AWS manages 64 zones in 21 geographic regions around the world and has established a European subsidiary in Luxembourg to ensure that European customers can comply with local regulations. The AWS subsidiary is subject to EU regulations, including data privacy rules.
The book introduces the reader to some interesting basics, such as that responding to a Request for Proposal (RFP) can cost $ 50,000â¦ even if their software is outdated.) It also notes that US compliance law tax, FATCA, cost foreign banks $ 40 billion but reported only $ 250 million in additional taxes, according to the Congressional Research Service.
Legacy systems, Zadeh notes, were developed in the pre-Internet era and were not designed to protect against distributed denial of service (DDoS) attacks.
The book names companies in many cases. Unfortunately, Zadeh does not name the global fintech software giant that pursued an acquisition and its CFO who changed terms during negotiations. The company also came up with a deal that would give it a higher payout and to the detriment of its key investor. He ended the discussion. Are you surprised that banking is the most heavily amended industry in the world?
Zadeh has practically retired in Spain but is president of Oh Open while Aler is now CEO.
The book is very readable as it describes the challenges – business, personal, technical and regulatory – of launching the first cloud-based banking software system. And it offers very practical lessons, such as a migration plan made over Easter weekend with steps every five minutes. It went well.
It’s not the usual summer beach read, but if you like to read about Ohpen, you might like Chris Skinner’s as well. Go digital– Lessons from leaders. Seth Merrin’s. The power of positive destruction is bringing computers to Wall Street by a serial founder, most recently of LiquidNet. Dan Simon, a fintech PR pro, has also written an excellent book on the industry. The masters the money – How a group of misfits took to Wall Street and changed finance forever.