Olivia Peterson leads the U.S. Federal Financial Services business at Amazon Web Services. She previously served as Senior Vice President of Client Services at SS&C Primatics and Senior Business Initiatives Director at Freddie Mac.
By most measures, the world’s financial institutions have made significant strides in the past few years digitizing their operations and their service offerings.
The pressure to keep up with consumers and investors — now accustomed to switching institutions with a few clicks on their smartphones — as well as an emerging cadre of technologically-disruptive competitors, among other factors, have driven most financial services firms to invest heavily in a variety of digital transformation strategies.
However, the continuing speed and impact of technology changes underway at banks, investment firms, insurers and other financial institutions are also putting enormous pressures on government monetary officials and financial regulators to keep up.
The need for greater agility at scale by federal agencies to monitor, examine, regulate and support financial markets clearly took on new urgency this past year in the face of the pandemic and news of the cyberattack on SolarWinds, which impacted the departments of Treasury, Commerce, Justice, Homeland Security, the U.S. court system, along with a number of corporations.
The good news is: The cloud computing capabilities propelling technological innovation among financial institutions are also available to federal agencies and regulators.
Moreover, the wide range of high-performance data processing, analytics and AI capabilities available from AWS today offer federal financial agencies and regulators not only a smarter way to procure state-of-the-art infrastructure. Those capabilities also provide altogether new and pivotal opportunities to:
Expand mission-focused capabilities — The critical mass of computing resources and engineering talent assembled by the leading cloud providers have led to a vast and expanding array of secure, turnkey and AI-assisted tools and IT services, many of which have become essential to operating in today’s digitally-connected world. These tools offer federal financial authorities far more powerful, flexible and automated mechanisms to help monitor and regulate the U.S. economy and its participants than what’s commonly available on most existing government IT systems.
Reduce mounting risks and costs — Financial services agencies face a triumvirate of technology challenges: Aging technology platforms that will only grow more expensive to maintain; a declining number of people who know how to program and maintain them; and a widening gap in agility and speed in responding to changing market conditions compared to financial sector leaders and malicious state actors. Modernization doesn’t just mean improving platforms and adopting emerging technologies like machine learning; it also means investing in infrastructure that can flex and scale at a moment’s notice, which only the cloud can achieve.
Enable advanced data strategies and analysis — The growth of digital transactions globally has put tremendous burdens on both regulators and regulated commercial entities to gather, process and analyze massive data sets for timely insights. The cloud makes it easier to collect, ingest, store and analyze data — and do so faster and more cost-effectively and securely. That helps alleviate burdens for both examiners and the regulated; but it also helps equip under-staffed agencies to leverage that data and respond more quickly to market risks, fraud and abuse.
Certainly, a number of regulatory organizations have already begun capitalizing on the scalability and capabilities of the cloud.
For instance, the Financial Industry Regulatory Authority (FINRA), the nation’s securities industry self-regulator, built a petabyte-scale data lake on AWS. It then took advantage of open-source technologies and cloud-native analytics tools to enable 1,500-plus analysts and business partners to securely query financial trading data — involving terabytes of data updated daily — across the U.S. securities market. This kind of performance could not be achieved on-premises.
The Federal Deposit Insurance Corporation (FDIC), meanwhile, has communicated its plans to modernize regulatory reporting processes and requirements to obtain more detailed and frequent data on banks’ loan portfolios. Currently, banks collect between 1,400 and 2,400 data fields, and transfer them to the Federal Deposit Insurance Corp. for aggregation and analysis each quarter. The goal, according to FDIC Chairman Jelena McWilliams, is to develop a “modernized and automated data system (that) would improve the ability of supervisors to identify bank-specific and systemwide risks sooner and more efficiently, while reducing the compliance burdens on individual institutions.”
And other agencies, such as the National Credit Union Administration, are also taking advantage of the cloud. NCUA has been piloting a web-based platform aimed at streamlining the examination process for credit unions and examiners. The new platform — the Modern Examination & Risk Identification Tool (MERIT) — is expected to be available this year and ultimately replace a 25-year old legacy application called the Automated Integrated Regulatory Examination System (AIRES).
There’s one other compelling reason why federal financial agencies and regulators should start capitalizing more fully on the cloud now: Today’s cloud services have made modernizing IT systems easier to procure and maintain for the future.
When AWS first launched the Amazon Elastic Compute Cloud in 2006, it also recognized the importance of making computing services easier to acquire. That led to the concept of “infrastructure-as-code,” which lays the foundation for applications that can launch and scale in seconds-to-minutes through code implementations instead of long procurement cycles.
What this means is innovation and modernization are no longer dependent on or stalled by technology refreshes and lengthy acquisition cycles; they can happen in minutes. Fast-forward to 2021: Given all of the FedRAMP-secured cloud solutions available through AWS and its partners, and AWS’s unique experience available to the federal government, the ability to innovate and modernize in new and powerful ways and to harness the power of data are literally at your fingertips.