The minds at independent bank OakNorth have set themselves one of the toughest challenges for any start-up: serve a highly-specialised target audience using cloud technology in a sector where security is the number one priority.
OakNorth Bank is described by its founders as "the bank for entrepreneurs, by entrepreneurs". A year ago this month, the company became the UK's first cloud-based bank, with the help of Amazon Web Services (AWS).
Senior representatives from OakNorth and AWS told Cloud Pro how they achieved this historic feat and what it meanings for the fintech company and its customers.
Banking by entrepreneurs, for entrepreneurs
OakNorth prides itself on its speed, flexibility and straight-talking financial support. Founded by Rishi Khosla and Joel Perlman, the bank offers debt finance (between £1m to £20m) to entrepreneurs and mid-sized growth businesses.
Central to its business is an efficient credit process. Whereas many high street banks may take months to deliver a refusal verdict, and longer still for a yes, Khosla says OakNorth delivers its verdicts in weeks, or even days.
Keeping this workflow running reliably is where cloud technology comes in.
"First of all, we are a fintech. We position ourselves as being cutting-edge in terms of technology. So, we wanted to reap the benefits of it where it made sense," says Francesca Gandolfo, COO of OakNorth, on the subject of why the start-up had its eye on creating a cloud-based banking solution from the get-go.
The decision to choose AWS was a straightforward one, Gandolfo adds: "We really wanted to have a global player that could leverage across all our geography, and bring us all the benefits of scale and scope that we could not afford being a start-up."
Today, OakNorth's core systems are fully hosted through a virtual private cloud (VPC) -- a highly secure service on AWS, enabling the bank, and its customers, to retain full isolation and control of their environments.
However, although OakNorth was already in talks with AWS when it first opened its doors to customers in September 2015, its plans for a cloud-hosted banking system relied on regulatory changes by UK's Financial Conduct Authority (FCA).
Faced with a choice between delaying the launch or opting for a traditional solution and exploring cloud options later, the co-founders chose the latter. The FCA, meanwhile, was gathering insights to provide firms with guidance on outsourcing to the cloud, as well as working with AWS more closely to figure out ways the cloud provider to work with banks, such as OakNorth, while still complying with the regulations it sets out.
When the start-up got back in touch with the FCA and AWS at the tail end of 2015, things moved very quickly.
"Through that triangulation, we came to the conclusion that it would be possible... to allow us to be hosted fully in the cloud," says Gandolfo.
"In around five months, with the help of AWS and our IT team, we managed to move the whole infrastructure from a traditionally host organisation to a cloud host."
Finance and cloud security
Whenever money is involved security is paramount.
Although OakNorth has established a UK-first with its cloud banking system, AWS chief evangelist EMEA, Ian Massingham, tells Cloud Pro that the cloud provider didn't have to implement special measures for it.
"We have over 1,800 different security controls that we apply to AWS," says Massingham. "This means that not only can we meet the security and regulatory requirements that come from the FCA, but we can also meet, and exceed, the standards that are set by many other regulators around the world."
Massingham explains that AWS's suite of off-the-shelf tools -- such as cryptography -- enables its customers to set up core technical systems for their business in a matter of minutes instead of months.
For the financial sector specifically, AWS meets critical standards, such as ISO 27001, a recognised certificate for handling payment card details.
Better banking with the cloud
Since establishing its cloud banking system, Gandolfo says the most significant change for OakNorth has been its "fully integrated landing system", which goes from customer sign-up to credit approval.
"For a bank like us, being in the cloud is eminently sensible," says Gandolfo.
Rather than filling in long questionnaires, she says, entrepreneurs can pick up the phone and speak to one of OakNorth's credit staff, explain their situation, and a credit meeting can happen "pretty much at the drop of a pin". So, long as the customer can provide all the information OakNorth requires, the bank can make a decision fast, because everything is stored in its digital network.
Now that the waters have been tested, the collaboration between OakNorth and AWS should act as a positive example for other banks, insurers and financial services companies in the UK looking to leverage the cloud.
