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Swiss Banks Ease Reluctant Stance On Cloud

Aaron Ricadela Brand ContributorOracleBRANDVOICE | Paid ProgramInnovation via – https://www.forbes.com/sites/oracle/2019/09/04/swiss-banks-ease-reluctant-stance-on-cloud/#5f6bbdfe3b1f

In Switzerland, whose sacrosanct banking privacy tradition helped it build one of the world’s top financial centers, evolving rules governing data movement as well as the rise of fintech competitors are changing corporate attitudes about cloud computing.

Swiss banks, influenced by decades of secrecy laws that forbade them from storing customers’ personal client information outside the country, have been reluctant to move their software to the cloud. So-called client-identifying data, or CID, includes account and contact information, even notes from meetings, casting a broad purview that also dissuaded insurers and financial brokers from using public clouds.

Credit Suisse building at Paradeplatz square in the city of Zurich decorated with flags
ISTOCKPHOTO/DENIS LININE

Now those institutions are more receptive to storing their application data in the cloud, on account of updated regulations, recommendations this year by an influential industry group, and the erosion of bank secrecy (for instance, account holder tax information is now being transmitted overseas). Banks and insurers also want the frequently updated features of cloud applications to help them compete with fintechs—startups offering financial services via easy-to-use mobile apps.

This evolving landscape has attracted Oracle and other cloud service providers, which this year have opened data centers to serve Swiss companies.

“There is a completely new situation in Switzerland—you can use the cloud now,” says Jan Seffinga, a bank consulting partner at Deloitte in Zurich. “The banking industry itself is changing, and others may follow the first movers.”

Cloud Door Opening

Two influential groups this year opened the door to change.

In March, the Swiss Bankers Association, whose roughly 300 members represent nearly all of the country’s banks, issued its guidelines for Swiss banks migrating to cloud computing. It recommends cloud data encryption and anonymization, as well as assigning some of the personal data under pseudonyms to protect clients’ identities.

So long as cloud service providers and subcontractors don’t have access to encryption keys or pseudonym assignments, “a Swiss bank may transfer client-identifying data to a foreign-owned cloud provider without requiring a waiver of banking secrecy from its clients,” law firm Schellenberg Wittmer wrote in a May newsletter published on its website

Meanwhile, updated computer outsourcing rules issued by Swiss financial regulator FINMA went into effect. “Changes in the requirements are allowing banks and insurance companies to think about new opportunities in the area of outsourcing, including cloud services,” consultancy PwC wrote in a December 2018 report, “Taking Swiss Private Banking to the Cloud.” Financial asset management workloads have moved first and could be followed by private banking and wealth management workloads, PwC said.

“Many customers still have their business-critical workloads on premises because they haven’t really found the destination which would allow them to run in the cloud,” Hanspeter Kipfer, a vice president and Switzerland country leader at Oracle, said in an interview with CNN Money Switzerland. Oracle’s cloud security and ability to scale workloads to many computers meet clients’ exacting needs, and the company can offer a range of computing, database, and applications services online, he added in an e-mail.

Data Center Activity

Oracle and two of its US competitors opened data centers this year to serve Swiss customers, highlighting how attractive the market has become. Local providers including Swisscom and Inventx are also vying to sell online computing, storage, data analysis, business applications, and machine learning services to the country’s banks, insurers, pharmaceutical companies, engineering providers, and food makers. 

Oracle in August opened a data center in Zurich to offer cloud-based computing capacity and Oracle Autonomous Database to Swiss customers. Oracle plans to make cloud application software available from the center by the end of this year. That data center, along with ones Oracle has opened in Mumbai, Sao Paolo, and Sydney, is part of the company’s plan to have 19 such centers running on its latest cloud processing and storage technology by year’s end.

Customers and partners including Swiss Post, watchmaker Chopard, network operator Orange Business Services, and the European Organization for Nuclear Research (CERN) have signed up for Oracle’s Swiss cloud. “I expect a lot of workloads to be transferred to Switzerland also from abroad,” Kipfer told CNN. 

To be sure, Swiss financial companies are advised to do their homework before moving data to the cloud. “The decision to use cloud services requires the bank to conduct a thorough risk analysis,” notes law firm Schellenberg Wittmer, “particularly with regard to the possible transmission of CID abroad, for which there are still some legal uncertainties.”

One of Oracle’s strengths is Oracle Database’s technical integration with core banking platform software from vendors such as Avaloq and Finnova. Those platforms let banks manage accounts, loans, and interest rates, among other functions.

Ideal Cloud Market

In many ways, Switzerland is an ideal cloud market. Its banks hold 27.5% of the world’s cross-border managed financial assets, according to the Swiss Bankers Association. The Swiss cloud market is forecast to grow 17% a year through 2023, to $5.05 billion, according to IDC.

Business development organization Switzerland Global Enterprise ranks the country fifth in Western European in the number of data centers and cites its cryptography expertise, energy independence, and number of broadband connections per person as advantages.

  • Aaron Ricadela is a director of strategic communications for Oracle.
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