More banks will leverage cloud native apps to modernize core infrastructure: Oracle's Sonny Singh

Digital technology is transforming the banking sector, enhancing customer experience, improving operational efficiency, and reducing costs amid the turbulent economic and regulatory environment. At Oracle CloudWorld event in Mumbai, a flagship event by the technology major, held on 14 February, Sonny Singh, Executive Vice President and General Manager of the Financial Services Global Business Unit at Oracle, spoke to TechCircle about the challenges banks are currently facing and the opportunities before them. He also discussed how banks are utilizing transformative technologies like cloud computing, artificial intelligence (AI), and analytics to enhance the regulatory environment, bolster cybersecurity, and streamline operations. Edited excerpts:

What new technology challenges are global banks facing? Is it different for Indian banking entities?
Since the covid-19 pandemic, banks are witnessing a momentum to drive modernization agendas more aggressively. There is increasing regulatory scrutiny leading to changes in capital adequacy regimes. Central banks rushed to raise interest rates to control inflation, which stressed their balance sheets using long-term interest rate-dependent instrument. This resulted in some banks to fail. While large banks had control mechanisms, regional and specialized banks were impacted by low interest rates, abundance of money and rising interest rates. Another development is the increase in projects related to generative AI. Indian banks are embracing new technologies to capitalize on the anticipated growth, but the regulatory landscape will largely be shaped by policies implemented by Reserve Bank of India. Various jurisdictions implemented different measures,  and some are more assertive. There will be increased regulatory scrutiny as a consequence of bank failures caused by insufficient capital.

In terms of tech adoption, do challenges differ from the ones faced by non-financial entities?
There are unique challenges as banks are fundamentally tech companies, and tech adoption is always a priority. India has done a great job on its payment infrastructure with UPI framework and based on identity verification of Aadhaar. We are seeing an increase in electronic activity. That’s why we see banks or financial institutions in general representing a very large portion of technology spending.

Are you integrating AI and analytics into banking products, services?
We have used AI model to make credit decisions and fighting financial crimes. Generative AI is being used in customer service for interactions and to personalized recommendations. It is used to create compliance agents that mimic bad actors, testing them against control systems. It is crucial for threat detection or response in cybersecurity. Automation of repetitive tasks through narrative generation is also emerging in banking, such as generating financial reports and suspicious activity reports.

But generative AI also comes with its share of risks. How are you managing the security risks in the enterprise?
We have unique capabilities that make us stand out in the industry, allowing us to create expansive computing environments for generative AI. Large language models require a significant amount of training data, often reaching terabytes. The more data provided, the more powerful the model becomes. However, this requires a substantial amount of computing power. We address this challenge by employing Remote Direct Memory Access (RDMA), a networking technology that enables lightning-fast information transfer between compute units. With our collaboration with NVIDIA, we can cluster up to 32,000 GPUs in a single cluster, allowing companies and startups to quickly train their models. They can bring their own data, use our high-speed compute resources, and retain control over their data. We prioritize data privacy and do not transfer data between customers.

How is Oracle’s Oracle Cloud Infrastructure (OCI), SaaS and other industry portfolios helping customers in their overall digital transformation journey?
We possess a truly unique position in the market having a vast range of capabilities. We have developed industry-specific applications for numerous sectors, including financial services, telecommunications, retail, energy, water, healthcare, and more. These applications are not only diverse but also tailored to specific roles within each industry. For instance, we offer financial applications for CFOs, human capital management applications for CHROs, CX applications for CMOs and Chief Revenue Officers, and a wide array of information systems for CEOs. Even within our horizontal applications, we incorporate vertical capabilities to enhance their functionality. For example, in financial services, we have integrated instrument ledger capabilities and risk management capabilities into our financial systems. In healthcare, we have added provider scheduling capabilities to our human capital management systems. In supply chain management, we provide provisioning and management of hospital cards for operation theaters. These are just a few examples of how we not only offer a portfolio of vertical applications but also bring genuine vertical capabilities to our horizontal applications. We deliver these applications to our customers on OCI, taking full advantage of the platform’s capabilities in data management, analytics, integration, and more. We ensure that our compute, memory, and storage resources are optimized to meet the specific needs of different industries. This applies to both traditional transactional applications and intelligence-driven elements such as AI-specific applications. We have meticulously engineered these capabilities, right down to the infrastructure, and this dual focus sets us apart from others in the industry.

How are you collaborating with regulators such as RBI to ensure fair practices, innovation, and risk control?
Our team of product managers actively monitors various regulatory bodies and anticipates upcoming requirements. However, our primary source of knowledge comes from our customers. They consistently keep us informed about emerging regulatory trends. For instance, we recognized the significance of ESG (Environmental, Social, and Governance) in the financial services sector 23 years ago and started working on it. We were aware that scope one, scope two, and scope three would eventually become mandatory. Therefore, we have been proactively developing solutions in this area. Additionally, when demonetization occurred, we swiftly collaborated with banks to equip them with the necessary technical capabilities to meet the specific requirements imposed by the government and regulators. Our approach is multifaceted, aiming to stay ahead of the market while also leveraging customer feedback to continuously enhance and expand the capabilities of our products.

What are the top technology priorities for the financial sector for 2024 and beyond?
The primary focus is to effectively utilize cloud native applications in order to modernize the core infrastructure. The second priority involves enhancing regulatory capabilities to address significant shifts, whether they are geopolitical or economic in nature. Cyber security is the third priority, which is crucial considering the increasing importance of data as a critical asset and the need to protect the same. The fourth priority is financial crime, as it can lead to reputational damage and fines that can negatively impact shareholder value. Therefore, careful monitoring of all transactions passing through the financial institution is necessary. Lastly, there is a need to enhance overall capabilities through the application of AI. This has become a crucial topic in boardroom discussions.