Meet the firm powering digital innovation at Vanguard and Betterment — Amazon

Amazon Web Services makes the case for firms to move their business to the cloud

May 9, 2018 @ 4:51 pm

By Ryan W. Neal

What does one Amazon executive think about his company competing in the financial services industry?

"I've been at Amazon for 21 years and I've learned to never say never about anything," said Andy Jassy, the CEO of Amazon Web Services, a subsidiary that provides cloud computing technology and accounts for the bulk of Amazon's operating income.

But the idea of Amazon competing with traditional banks, broker-dealers or investment advisers is "pretty unlikely," Mr. Jassy said, speaking at a symposium in New York on how financial institutions are using AWS. Even if it did, Amazon's track record of entering new industries isn't perfect.

"Just because Amazon chooses to invest in an area, whatever that area is, does not mean we'll be successful," Mr. Jassy said, reminding the audience of the ill-fated Amazon Fire smartphone.

(More: Why Amazon won't enter the advice market)

For now, the company seems less interested in disrupting financial advice than it is in expanding the already sizable relationship between AWS and established financial institutions. AWS counts Vanguard, Betterment and the Financial Industry Regulatory Authority Inc. as just a few of its financial services clients.

In front of an audience of chief technology officers and other "decision-makers," Mr. Jassy made the case for why businesses should move their business off legacy systems and into the cloud.

Companies need to think about what their clients care about and use technology available to meet those expectations, he said. If that shift isn't made soon, firms will find themselves in a hole that's increasingly difficult to climb out of.

"This is the time, if you're not already, to be figuring out how you're going to be using the cloud," Mr. Jassy said. "It's going to change what you can do for your business and your customers. And more importantly, you're going to be in a chasing position instead of a … leading position if you don't."

One way AWS is attracting financial firms is with advanced databases, an area many financial institutions have struggled to modernize. Legacy systems are holding many firms back from adopting the latest technology that feeds off data, such as artificial intelligence.

(More: Wirehouses best positioned to benefit from artificial intelligence)

Some firms are looking for a more cost-effective infrastructure to support cloud-based technology. Vanguard chief technology officerJeff Dowds said his company had invested in building a private cloud, but ultimately found it "quite expensive and quite time-consuming."

Two years ago, Vanguard decided instead to utilize a public cloud and began migrating toward AWS. Reducing costs was an initial motivator, but Mr. Dowds said the primary benefit has been the competitive advantages AWS provides in developing new technology.

"The innovation you can tap into with AWS is just amazing," he said. "I'm blown away by the breadth and depth of the technology that's available for consumption."

Vanguard has either already moved or is in the process of moving most of its business-critical applications to the cloud, and is using AWS to handle all new development work, Mr. Dowds said. Amazon's technology is supporting Vanguard's efforts with AI and machine learning as well.

It isn't just established financial institutions that are turning to AWS, but startups as well. Anil Beniwal, Betterment's director of engineering, explained to InvestmentNews that the digital adviser was running into some limitations with its own servers.

Migrating to a public cloud allowed Betterment to launch new business lines — its white-label robo, Betterment for Advisors, and its 401(k) offering, Betterment for Business.

(More: 401(k) robo-revolution is underway)

"We recognized that as we were going to scale, we needed to be a bit more nimble," Mr. Beniwal said. "It meant that we needed to be able to scale out the capacity we had relatively quickly."

Robo-advisers like Betterment have helped push the wealth management industry toward adopting modern technology. While moving to a cloud like AWS can help established firms achieve that, Mr. Beniwal said that firms can't just throw code into the cloud and expect it to work. There has to be a commitment from the top of the organization to develop technology that meets consumers' needs.

"I think there's a very large amount of thoughtfulness that has to go into architecting a robust cloud system," Mr. Beniwal said. "Investing in the right level of architecture and research is really important."


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