The Dutch Pioneers Who Created Banking In The Cloud

Banking the Cloud: The Comprehensive History of Cloud Banking and Those Who Started It.” By Chris Zadeh, Matthijs with Mary Curran-Hackett. Forbes Books. 364 pages, Glossary and Time Line but no index.

Banking the Cloud is the story of Ohpen, a fintech startup in Amsterdam that became the world’s first cloud-based core banking system.

Like successful tech startups just about everywhere, it had a core team of very smart people who worked incredible hours for years. Many were misfits to a degree and didn’t fit into a traditional corporate or job structure but happily jumped in when needed regardless of job titles and figured out how to make stuff work.

Chris Zadeh and Matthijs Aler started at BinckBank, an online financial firm where they got a basic education in putting out fires, from rescuing a stalled migration to a new version of a core software program, to taking over a project from a Romanian outsourcing firm whose code didn’t work. At all.

They worked with a small team that they carried over to create Ohpen after BinckBank went through a merger and became bureaucratic. The Ohpen team developed a basic blueprint: scope determination, governance, decision risk logs, priorities, phases and meeting structures. And they adopted a rule: Don’t change the scope, ever!

“We gained more experience in those eight years than most people do in a lifetime,” said Zadeh.

A big difference between tech companies and fintech companies is that the fintechs operate in a highly regulated world, and the regulations are subject to change. Ohpen’s target customers were banks. Bankers are risk averse and often technologically ignorant, despite the fact that banks are dependent on technology.


Zadeh recounted a bank executive telling him the cloud wasn’t safe, but he was unable to explain what the cloud was. It reflects a problem Chris Skinner, an expert on digital banking, has complained about repeatedly — bank boards don’t have enough, often don’t have any — tech experts despite being dependent on technology.

Writing in his The Finanser blog in June, Skinner argues for a bank technology team that sounds a lot like Ohpen.

“Bottom line is that any bank that boasts tens of thousands of developers, technologists and engineers should first be asked the question: WHY? I don’t know why any bank today needs tens of thousands of developers, technologists and engineers. With APIs, Open Banking, cloud computing and more, a bank could probably run with just ten. You heard me: a bank that runs with just ten engineers.”

But they may need a lot of lawyers. It took Ohpen nine months to get an agreement from Robeco (at the time a subsidiary of Rabobank), the Dutch Central Bank, and AWS to gain approval for banking in the cloud. Zadeh said that AWS was very helpful in gaining approval. It had to modify its own rules on audits to accommodate the central bank regulators. Fortunately, everyone involved — including the regulator — knew cloud was key to allowing financial firms to operate with a modern platform that would save investors and depositors millions.

Bankers wanted to know if their data would reside in the EU, because they didn’t want it within the reach of U.S. investigators and the long reach of the Patriot Act and the USA Freedom Act.

Fortunately for the Europeans, AWS maintains 64 zones within 21 geographic regions around the world, and it has created a European subsidiary in Luxemburg to make sure European clients can comply with local regulations. The AWS subsidiary is subject to EU regulations, including data privacy rules.

The book takes a reader through some interesting basics, such as the fact that responding to a request for proposal (RFP) can cost €50,000…(See my recent story on the way RFP’s skew in favor of old technology and firms with large customer bases, even if their software is outdated.) It also notes that the U.S. tax compliance act, FATCA, cost foreign banks $40 billion but brought in just $250 million in additional taxes, according to the Congressional Research Service.

Legacy systems, Zadeh notes, were developed in a pre-internet age and weren’t designed to protect against Distributed Denial of Services (DDoS) attacks.

The book names companies in many cases. Unfortunately Zadeh does not name the global financial tech software giant that pursued an acquisition and its CFO who changed the terms during negotiations. The firm also offered a deal which would give him a higher payout and at the expense of his key investor. He terminated the discussion. Any wonder that banking is the most heavily fined industry in the world?

Zadeh has quasi retired to Spain but serves as chairman of Ohpen while Aler is now CEO.

The book is very readable as it describes the challenges — business, personal, technical and regulatory — of launching the first banking software system to be based in the cloud. And it offers some very practical lessons, like a migration plan carried out over Easter weekend with steps in five-minute intervals. It went smoothly.

It’s not the usual summer beach reading, but if you enjoy reading about Ohpen, you might also like Chris Skinner’s Doing Digital— Lessons from Leaders. Seth Merrin’s. The Power Of Positive Destruction is about bringing computers to bear on Wall Street by a serial founder, most recently of LiquidNet. Dan Simon, a fintech PR pro, has also written a great book about the industry The Money Masters — How a Group of Misfits Took on Wall Street and Changed Finance Forever.