Cloud solutions offer financial firms significant benefits
While growing numbers of financial services institutions (FSIs) worldwide have adopted cloud solutions in recent years to meet customers’ and shareholders’ demands for improved cost efficiency, we still do not see cloud enablement on a wide-scale basis. That’s because various concerns, including the regulatory landscape and data security, are holding many FSIs back from embracing the cloud, despite all the benefits it offers.
In this blog series, I will examine how cloud solutions offer too many benefits to ignore and why FSIs’ fears are not grounded in today’s realities—which Accenture has detailed in its report, Cloud . . What’s Stopping You?
First, let’s examine what cloud solutions offer.
Importantly for FSIs, the cloud has all the characteristics and disruptive force required to drive unity and integration of their customer, digital and product-centric approach into a single entity. This would help FSIs move away from their traditional approaches, improving customers’ experience and ultimately establishing these organizations’ presence and positioning in the wider, expanding and evolving digital ecosystem.
While FSIs initially focused years ago on developing in-house cloud solutions, public and hybrid cloud solutions have been gaining popularity more recently because of their ability to leverage a combination of different deployment and service models. The result has been a shift toward Platform as a Service (PaaS) and Business Process as a Service (BPaaS). In addition, data analytics services sourced from the cloud are generating significant and growing business value for FSIs.
Where has this led the industry?
- Retail banks’ cloud investment still centers on the private cloud and Software as a Service (SaaS), but the public cloud is gaining ground for back-office functions. But by transforming customer service and creating an ecosystem of business alliances and merchants through cloud enablement, banks can adopt the “Everyday Bank” model we believe will be necessary for future growth.
- Use of SaaS is growing as well in the capital markets but not at the same rate. Capital markets firms, however, are collaborating on an initiative to realize cloud-enabled unified communication “hubs.” In addition, significant capital is being invested in cloud enablement of BPaaS in areas such as post-trade processing, which capital markets firms have a tremendous appetite for. But capital markets firms could gain even greater flexibility and agility across their operations by adopting the cloud more widely.
- Among insurers, there is more aggressive cloud enablement because of the perceived lower level of regulation. Insurers’ interest has focused on the Internet of Things and its enablers, including telematics, a technology widely used in personal and commercial vehicle insurance. This kind of disruptive change is expected to lead to more personalized insurance coverage benefiting insurers as well as their customers. By further embracing cloud solutions, insurers could realize the cloud’s full transformative potential.
Overall, however, banks, capital market firms and insurers still are following separate digital and cloud agendas, largely because of limited cloud-based services guidelines from regulators. The risk of those separate agendas is that FSIs will adopt only advanced virtualization projects, instead of creating the more desirable unified ecosystem.
While FSIs’ concerns are understandable, they should not hold organizations back from taking advantage of the cloud. I’ll explain why, covering each concern separately, in future posts.
Next time: Regulatory concerns.