- Wall Street firms are turning to the public cloud for analytics, scalability, and innovation.
- AWS, Google Cloud, IBM, and Microsoft Azure are launching bank-specific business lines and offerings.
- Here’s how each company targets the finance sector and their value propositions.
- See more stories on Insider’s business page.
Not all public clouds are created equal. And the distinctions between the providers’ offerings are magnified as the race to win over Wall Street, and its money, heats up.
Amazon Web Services, Google Cloud, IBM, and Microsoft Azure have made in-roads with financial firms in recent years. IBM and Microsoft unveiled finance-specific business lines this spring, while AWS and Google Cloud announced plans to tackle financial data and analytics with the release of Amazon FinSpace and Google Cloud Datashare, respectively.
The impetus?
“If you want to make money, go where the money is,” Melanie Posey, research director of cloud and managed services of 451 Research, an arm of S&P Global Market Intelligence, told Insider, referring to the wave of financial firms opening up their budgets to tap the scalability, resiliency, and innovation that comes from using the public cloud.
“That’s where the big money is,” she added.
As more Wall Street firms pair up with public-cloud providers, industry analysts are taking notice of the differing strategic approaches — and the financial institutions gravitating toward each one.
To be sure, the public cloud market has matured over the last five to seven years, making the perceived differences between the major providers subtle.
That wasn’t the case in the early 2010s. AWS used to be a leader in geographic coverage while Google Cloud dominated data and analytics. But since then, competitors have caught up, Posey said.
“At this point, it comes down to differentiation where the installed base of existing customers tends to be. And particular use cases are what separates the hyperscalers out into the broader market,” Posey said. “It’s not necessarily the case anymore that one player has a huge strategic advantage just in terms of product over any of the others.”
Here’s a breakdown of the biggest strengths of four public-cloud providers looking to serve Wall Street.
Amazon Web Services
Top strength: Scope and depth of offerings
AWS often leads with its 15 years of experience in financial cloud migration when pitching to financial services, according to an October 2020 report from 451 Research, but the greater pull is really its suite of offerings.
“AWS overall gets the top mark for having the best breadth and depth of different services and capabilities and features,” Posey said. “Its product portfolio, objectively speaking, has the most individual SKUs as part of its public cloud offering than anybody.”
SKUs are a way of tracking the number of items for sale and can fluctuate based on pricing. For public cloud providers, this can be tied back to the number and variations of services and tools offered. At the end of 2020, AWS had around 2 million unique SKUs for sale, compared with Azure’s 80,000 and Google’s 18,000, according to analysis by 451 Research.
Since its 2006 founding, AWS has attracted born-in-the-cloud companies, Posey said.
Coinbase, for one, runs its global bitcoin exchanges and wallets on AWS, while trading app Robinhood uses AWS to operate its online business and update its mobile app, according to AWS. Stripe has used AWS since 2011 to deliver its payment offering.
AWS has also inked deals with some of the biggest names in finance.
One of its marquee banking customers can be traced back to 2015, when Capital One announced its partnership with AWS. Since then, Capital One has taken its cloud migration one step further, announcing in February that it would ditch its data centers and migrate fully to AWS’ on-demand cloud infrastructure.
JPMorgan Chase and Millennium Management, the New York-based hedge fund with more than $51.5 billion in assets under management, are other incumbents plugged into AWS. The firms are using AWS’ data and machine-learning tools to improve trading analytics and AI initiatives.
Google Cloud
Top strength: Data analytics and new distribution channels for fintechs
Google Cloud’s position in the market was built on its data and analytics capabilities, and it still leverages that strength today, Posey said.
There are over a dozen in-house tools and features listed on Google Cloud’s website that address data warehousing, data integration, preparation of data for machine learning use, and interactive dashboarding, to name a few.
A more recent example of Google putting its data-engineering strength to work is through the launch of Datashare, a financial data exchange launched in June. It automates the thorny process of standardizing various data sets into a uniform format so customers can manage and analyze diverse data from various providers in a consistent way.
FABRICE COFFRINI/AFP via Getty Images
Google Cloud has scored big names on Wall Street, including Goldman Sachs, HSBC, and Deutsche Bank.
“We are a wholesaler of risk, we need to be measuring, factoring, analyzing and monitoring risk and it consumes a lot of compute power,” Goldman Sachs co-CIO George Lee said at a Google Cloud event in July 2020, adding that its partnership with Google Cloud allows the bank to do that at scale.
It’s also a “natural choice” for companies born in the digital era, as they aren’t tied down by legacy tech stacks that must be compatible with on-premise infrastructure, Posey said.
PayPal is one such example. The payments giant announced in May that it would expand its partnership with Google Cloud to help the company process transactional data at scale, tapping both its infrastructure and analytics capabilities.
Another draw for companies working with Google Cloud is its explicit approach to integrating its partners’ capabilities into Google Cloud’s ecosystem and supply chain through a joint-selling framework. Google Cloud, for example, recently added PayPal as a payment method for Google Ads and Google Workspace.
To be sure, other providers deploy similar tactics, like AWS’ marketplace of software vendors and Microsoft Azure’s partner ecosystem.
IBM
Top strength: A hybrid approach with a baked-in regulatory framework
IBM occupies a different space in the public cloud market, as the tech giant is leaning on a hybrid approach versus a complete migration, Posey said.
The hybrid model, in which certain systems and data remain on-prem while others migrate to the cloud, makes IBM an attractive option for bulge-bracket banks that operate under stringent regulations, which vary among countries and evolve over time, she added.
On Wall Street, retail and commercial banks are more reluctant to adopt cloud tech thanks to stricter regulations compared with investment banks and hedge funds, Posey added. Banks have been slow to move core systems and sensitive customer data off premises.
IBM worked with Bank of America to create its finance-specific offering, which publicly launched in April. Industry regulatory bodies were also involved in helping the tech giant with development, and its acquisition of cybersecurity software provider Spanugo strengthened its technical framework, according to an April 2021 report from 451 Research.
That said, Bank of America was a main driver of the cloud’s regulatory rigor. The bank had stiffer requirements than what IBM had seen from regulators, and the two firms created more than 400 management controls during the development period, IBM CEO Arvind Krishna previously told Insider.
“What they do is take some of the work off the customers’ hands in regard to compliance and staying up to date with regulations and data protections, data privacy, and data sovereignty,” Posey said.
Plus, IBM’s enterprise technology business, unlike some of its competitors, precedes the public cloud, Posey added.
IBM already has a pool of existing customers that have previously installed its hardware and software. The tech giant is a natural fit to help firms migrate part of that tech into the cloud. In the past four years, IBM has focused its efforts on businesses looking to have hybrid IT environments, compared with those looking to go all-in on the public cloud, she said.
Microsoft Azure
Top strength: Connectivity with enterprise IT and technology from partner ecosystem
Microsoft Azure’s key selling point is its interoperability, both with its existing IT offerings and services, as well as its partners’. As another public cloud provider with a built-in enterprise customer base — from operating systems to productivity applications — “Azure is a natural choice for organizations who have a big installed base of Microsoft in their IT environment already,” Posey said.
The tech firm spun out its own finance-dedicated cloud in March, with a common data model that enables users to integrate existing services, like Microsoft 365 and Dynamics 365, with cloud-native ones.
New capabilities Microsoft introduced via its financial-services cloud include a loan manager that automates front- and back-office lending processes, self-service tools for retail customer onboarding, and artificial intelligence that continuously learns changing fraud patterns.
“Each of these capabilities is composable, meaning they can be deployed one at a time or in groups,” Bill Borden, corporate vice president of worldwide financial services at Microsoft, said at an event in March.
Morgan Stanley is the latest bank to tap Microsoft, in a bid to boost scalability and compute power, the bank’s head of tech told Insider in June. The bank maintains a multi-cloud approach, upholding existing deals with AWS, Google Cloud and IBM, though it dubbed Microsoft its lead partner.
Capital One, JPMorgan, and Bank of Montreal are other top-tier banks using Microsoft Azure.
Microsoft’s partner ecosystem also benefits from the underlying interoperability of Microsoft’s cloud-based and traditional IT offerings.
The partner ecosystem includes core providers Fiserv, Finastra and Temenos, automation platform BluePrism, and payments giant ACI Worldwide. The built-in network is a “key factor in its delivery of cloud services for the financial sector” as the software vendors support cloud deployment and migration and service management, according to the October 2020 report from 451 Research.
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