As part of a new strategy to put cloud-based core systems in place for microfinance institutions in emerging markets, Microsoft has partnered with banking software provider Temenos to migrate its T24 core banking system onto the Windows Azure development platform. The companies aim to lower costs for financial institutions with this solution by using a consumption-based pricing model and eliminating the need to maintain and operate hardware and software associated with on-premise core systems.
The first implementations of T24 on Windows Azure went live in May 2011 in six microfinance institutions located throughout different regions of Mexico, including Sofol Tepeyac, Grupo Agrifin, Findeca, Su Servicio Financiero and Capital Global. (As of this writing, the sixth institution does not yet wish to be public.)
"These are some of the smallest institutions that the company serves, with customer counts in the hundreds," says Murray Gardiner, director of microfinance and community banking at Temenos. "These are institutions that wouldn't otherwise have access to core banking systems," he says, adding that most of them were previously using spreadsheets to store and track data.
The companies worked together to optimize T24 for the Windows Azure platform. Running T24 natively on Windows Azure does not change the system's response time or functionality, according to Gardiner. And because the solution is on a low-cost, consumption-based pricing model, financial institutions should be able to easily scale their resources and increase volume on demand.
When it comes to matters of security, Gardiner says that "risks are mitigated and significantly reduced" on the Azure platform. Safeguards include multiple levels of physical and data security, with restricted access to the data centers and servers themselves and high levels of network protection, according to Colin Kerr, industry solutions manager for Microsoft's Worldwide Financial Services. In addition, says Kerr, Microsoft and Temenos are partnering with financial institutions to ensure compliance with local laws, regulations and industry requirements.
Although it's still too early to cite any specifics in terms of cost savings or growth, Kerr acknowledges that the mere use of this cloud-based core system is a big step for the Mexican microfinance institutions and for the financial industry on a whole. "Many in the industry thought this was still going to be a long way off," he says. "I think it surprised many people how quickly these institutions are willing to put their core systems in the cloud."
Temenos and Microsoft are in the process of expanding the cloud-based solution into microfinance institutions throughout Africa, Southeast Asia and other emerging markets. "We're seeing a real surge in interest in places such as India, where the government is on a mission to make sure the economy is addressing the need of the unbanked," says Kerr.
Both companies acknowledge that many financial institutions are still hesitant about adopting cloud technology for mission-critical processing, but also stress that those Temenos/Microsoft customers who have on-premises solutions have the option to make the transition when they're ready. "The roadmap to take them into the cloud is now there," says Kerr.