An acute shift from function-specific to enterprise-wide cloud adoption finance industry.
The Cloud has been used in several industries to streamline business-critical applications or processes and improve operational efficiency, but its impact on the financial sector has been particularly notable. According to the 2020 IDG Cloud Computing Study, there has been a significant rise in organizations moving their legacy infrastructure to the Cloud. Over 55% opting for multiple public clouds and financial service providers entering Cloud partnerships worth tens of millions of dollars.
Impact of COVID-19 on the Finance Industry & paradigm shift to Cloud
The COVID-19 pandemic has accelerated digital adoption. Suddenly, ‘Virtual’ was the new normal. As lockdowns went into place, organizations that primarily depended on in-person customer service were forced to adopt a virtual route instead. They had to meet their customers where they were, which was increasingly at home. COVID-19 accelerated technology transformation in every industry. Banking and financial services is one such industry that witnessed the tremendous digital transformation. The pandemic demarcated legacy-driven enterprises from cloud-driven enterprises. It was evident that winners in this industry will be cloud-first, as the winners are in almost every other consumer-facing business. Google survey reports, nearly 83% of the survey financial services companies deployed cloud technology as part of their primary computing infrastructures. At the same time, few other companies opted for interim digital solutions that ensured business continuity during the pandemic. Here are the two most significant benefits that early cloud adopters enjoyed compared to traditional businesses in the BFSI industry.
Business Continuity
Financial services companies that were early adopters of cloud technology were clearly at an advantage during COVID-19. They leveraged the opportunity to improve businesses by collecting, analyzing, and using data and converting it into actionable insights for making informed decisions. They offered new services and handled millions of government assistance applications concisely. These organizations looked beyond the conventional compliance and security roadblocks and relooked at risk mitigation and business continuity plans to deploy robust and reliable disaster recovery solutions. Not to forget, they were the ones to quickly shift to remote workforces because they were already prepared to work remotely.
Competitive Advantage
Banks who had shifted their work to the Cloud were better able to compete with the FinTechs already digitized and set up in the Cloud. They provided more capable mobile applications that integrate traditional banking with other services such as financial planning, loans, insurance payment services, and investment management. Using the Cloud could serve large numbers of customers while keeping costs down. For instance, Google and Amazon, venturing into providing financial services, are already on the Cloud and offer the two most compelling customer benefits – unparalleled speed and lower cost. Banks that adopted cloud computing had the flexibility and scalability to meet such market competitions and ensure maximum market share.
To sum up, the banking and financial services industry is well aware of these advantages, so it’s no surprise they are increasingly adopting cloud platforms; the global finance cloud market is expected to grow more than 22% annually through 2025. Also, according to a 2021 survey by Accenture, 82% of banks view Cloud as critical to sustainability & security goals, and 89% believe it is crucial for mitigating business uncertainty. Financial services companies must make informed decisions to replace the outperforming on-premises architectures to keep up with the latest market trends and gain a competitive advantage. If actions are not taken in time, they will have difficulty managing volumes and incur enormous costs. Making a move to a cloud is a winning strategy for financial services enterprises but not accessible due to various regulations, security, and compliance associated with the industry.
Why are Banking & Financial Services Organizations slow adopters of the Cloud?
While many financial services companies are joining the cloud computing bandwagon to gain maximum business benefits and improve customer experience, it still seems more like an adrenaline rush that is wearing off with the pandemic on the wane. According to a recent global survey from Accenture ACN, big banks have only 8% of their overall workloads and just 2% of their core IT functions — such as payments and core banking — running in the public Cloud. Also, it was reported that 47% of banks have a significant share of their workload in the Cloud, yet only 35% have captured the total value they expected. There is an evident reluctance towards enterprise-wide cloud adoption due to concerns around privacy and security. Traditional bankers prefer on-premises configurations and storage for ease of meeting stringent compliance regulations and security requirements. For years, banks & financial institutes have used spreadsheets and their proprietary software to manage customer data and make decisions about loans, investments, and more. Seven of ten banks in the Accenture survey reported having moved all or part of their enterprise software — desktop, human resources, and CRM— to the Cloud, but just one out of six has done the same with the core functions of payments, capital markets, and core banking.
But is the need for stringent compliance and security not available on the Cloud? Or is it possible to not only meet but enhance their compliance and security needs using the best cloud service providers?
For instance, Microsoft invests billions of dollars into cloud security to maintain the highest privacy and data security standards. The Microsoft Azure platform is fast becoming the most trusted Cloud for the BFSI industry. Their combination of vast expertise, built-in security features, and real-time network monitoring capabilities helps organizations drive digital transformation faster while minimizing risks. With Azure, banks can take advantage of unlimited, elastic cloud resources and perform a more in-depth risk analysis, modeling, and simulation. Moreover, organizations can get actionable insight based on current market trends, reduce infrastructure costs, and respond quickly to regulatory changes.
In a nutshell, bankers and financial service providers can use the Cloud to store data and report breaches more effectively. They can access data more quickly, repair security breaches more efficiently, and store data at multiple levels of encryption, as necessary while maintaining the highest levels of encryption required by regulatory bodies. Hence, cloud storage is more secure than on-premises storage that needs large IT teams and security experts for regular maintenance and updates.
Did You Know? – According to one of the Forbes report, the global finance cloud market is expected to grow more than 22% annually through 2025.
Guide for Enterprise-wide Cloud Migration Strategy
The migration of an enterprise ecosystem from on-premises to Cloud is a mindful and careful journey; it’s an evolution. It includes migrating the existing IT infrastructure and services and gradually moving to a holistic cloud model. While the Cloud offers significant benefits, the challenges of adoption and migration from on-premises to Cloud can’t be ignored.
To make the Cloud migration process more realistic, we have used the Hoshin Kanri initiatives of planning, execution, and reflection to help the financial services companies ensure a rapid, seamless, and secure transition to Cloud.
Planning
- Evaluate the scope of migration and plan a systematic migration strategy, post a detailed assessment of the potential risks associated with this migration.
- Elaborate on the integral risk-based approach and categorization of the control demands in the Cloud environment before the migration.
- Selection of the suitable Cloud deployment model – Private, Public, or Hybrid Cloud, depending on the criticality of the data, data management, data location, and network management.
- Plan an effective Cloud data migration process to discover, understand, and place data.
- Ensure sanitation of the Cloud data, standard policies update, and keeping data lake up to date before moving to the cloud model.
Execution
- Data Mobility – The financial industry needs to mobilize data to drive efficiency, boost customer loyalty, provide additional security, and fuel everyday investment actions. Organizations must leverage policy-driven, intelligent data mobility to support consolidation and divestitures.
- Data Analytics – An accurate analysis of existing data will result in more profitable decisions for a financial institution. Organizations must heavily depend on analytics-based platforms that identify personal and business-sensitive data to derive more value for the financial customer.
- Data Security –Protect data against breaches, hacking, malware, insider threats, and accidental disclosures with robust technology solutions that ensure customer information in banking environments is appropriately secured.
- Data Compliance – The compliance field has experienced significant growth and investment since the global financial crisis of 2008, and the compliance functions of many firms have expanded rapidly ever since. Its primary for BFSI organizations to ensure efficient audit reporting for the SEC, EBA, and other regulatory financial authorities.
Reflection
Cloud migration can be overwhelming, involving rehosting, re-platforming, or refactoring. The important thing is to reflect on the continued operations with efficiency and improvements post-migration. To measure the success of cloud migration, here are some key performance indicators (KPIs) that can be considered to achieve maximum business benefits:
- Performance and Response metrics: Response time- Average Response Time (ART) & Peak Response Time (PRT); Server performance metrics- CPU utilization, Memory utilization & Load average and Application & service availability, overall uptime.
- End-user experience: Error rates, Error types, Latency, and Customer satisfaction scores (CSAT), and Net Promoter Score (NPS).
- Security metrics: Data exposures, Network input/output, User audit, S3 accessibility, Indicators of compromise (IOCs), and External services and collaborators.
How can Banking & Finance Companies Leverage Data Dynamics Platform?
Data Dynamic’s Unified Unstructured Data Management Platform is at the Forefront of Innovation in Banking & Finance. Financial organizations can fully capitalize on our platform’s unstructured and high-volume data capabilities, realize competitive advantages, and drive new market opportunities. Data Dynamics helps in efficient data mobilization, analysis, and security and ensures that data is managed in compliance with regulatory requirements. Our data management platform is used by some of the biggest names in banking and finance. For more information, contact solutions@datdyn.com or click here to book a meeting.
The transition to cloud technology presents several technical and process-based challenges for leadership roles and front-line employees. To help ensure a smooth path to cloud adoption, it’s crucial to develop a well-thought-out strategy and take each step slowly but surely.
Resources:
Google Blog | Forbes | Accenture | Portfolio+
