By Bucky Porter, financial services industry analyst for Windstream Enterprise
It’s not a matter of if but when banking will move to the cloud. Here’s how to ensure a smooth, secure transition
Recently I had the chance to look on as a couple of banking technology execs grilled a panel representing more than 10 of the biggest names in the core banking software business. What struck me was how the questions they fired at the panelists kept returning to one issue: cloud migration.
The keen interest in cloud migration — and the security issues it raises — is evident across the world of banking and finance, from boardrooms to the C-suite to industry events and, yes, even to media outlets like this one. And for good reason. Consumer demand for cloud-enabled digital services is growing fast, and disruptors are entering the space to meet that demand, dialing up the pressure on financial institutions to keep pace. What’s more, by migrating systems, processes and data to the cloud, institutions that do it right will set themselves up to explore a wide range of new revenue opportunities while also capturing new business efficiencies. Then there’s the ever-present cybersecurity threat, which looms large as institutions contemplate how to best protect their networks, systems, data and customers in a cloud environment.
Cybersecurity risks are a big reason financial institutions by and large are approaching cloud migration conservatively. In a recent banking trends survey conducted jointly by Windstream and Industry Dive, just 36% of banking and finance execs said their institutions have already undertaken a cloud migration and are planning to invest more in that effort. Asked how they would spend their resources on digital solutions, 70% of respondents identified cybersecurity as their highest investment priority.
As legitimate as their cloud-related cybersecurity concerns may be — financial services and banking long have been a favorite target for cyberattacks, according to Financial Services Information Sharing and Analysis Centers’ 2022 report, and the frequency and cost of these incidents are increasing — the benefits of migrating more aggressively to the cloud are too substantial to ignore:
- Future-proofing the business. Driven by customers’ desire for convenience, self-service and integrated experiences, the future of core banking is irrefutably cloud-native, with the emergence of open banking and apps designed to empower people and give them greater insight into their finances. It’s critical that institutions begin identifying the role they’ll play in these areas, then start putting a digital, cloud-based infrastructure in place to support that role.
- Enhancing security around your network, data and digital assets. Security clearly must be top-of-mind in the context of any bank’s cloud migration effort. The good news is that with a modern, software-defined wide-area network (SD-WAN) to support their cloud-based systems, institutions gain access to a range of security tools that protect the network and the assets connected to it — tools like Secure Service Edge (SSE) and Secure Access Service Edge (SASE).
- Giving consumers what they want and communicating with them on their terms. FinTech companies, banks and their partners are moving aggressively to meet customer demand for a better user experience by offering cloud-based services built around APIs (application programming interfaces).
- Meeting regulatory requirements more efficiently. Reporting and compliance data can be much more straightforward to manage and access via a single, integrated cloud-based network.
- Accessing advanced data analytics to run the business more intelligently. Newer cloud data architectures come with powerful data analytics tools banks can use for pricing loans and other products, targeted marketing, etc.
Migration Best Practices
Realizing benefits like these as part of a cloud migration isn’t a given, however. Based on our experience helping institutions migrate to the cloud, here are some of the practices that consistently produce positive outcomes:
- Make a wish list, prioritizing the solutions in order of must-have to nice-to-have. Your priorities for cloud migration are based on a number of factors, starting with the demands of your current and target customer base. You also need a clear picture of your current core systems, including those running on legacy software that you identify as most in need of replacement. And you need to ensure your network is robust enough to support a move to cloud. Conducting a cost-benefit analysis of your technology options is a must as you prioritize your wish list relative to your budget.
- Educate the C-suite and the board by conveying the case for migrating to the cloud, along with the steps a migration would entail and the impact it would have on the business.
- Develop a migration strategy, whether it involves a major overhaul or a piecemeal approach. Some banks choose to go all-in by migrating multiple core applications and systems to the cloud. Others opt for a more conservative approach. Whatever route an institution chooses, be sure to have a migration plan that covers everything from strategy to roles and responsibilities, technology and vendor selection, and business requirements analysis.
- Align with a provider that is best equipped to meet your strategic priorities and your support expectations. The support you get from your tech and cloud service providers during and after migration can be as important as the solutions themselves. So be sure to understand what your current core software provider(s) can (and are willing to) support. Are there solutions and providers out there that could better meet your needs and budget? Seek out strategic partners who can help you design and implement the right solutions for your institution, and prioritize a provider who can bring your must-haves together under one vendor.
- Make cybersecurity your top priority. In a recent report from VMWare, 74% of financial security leaders said their institution experienced one or more ransomware attacks in the past year. So review your bank’s tech stack, network architecture and security protocols to identify vulnerabilities and risks, then determine the protections that are likely to be most effective.
- Do it all through a customer lens. A seamless, robust and secure user experience is a must. Where can you automate? How readily and seamlessly can customers hop from one communications channel to the next? And how easy is it for them to conduct business through a single pane of glass?
- Measure. You can’t improve what you don’t measure. To what extent are your migration efforts translating into improved customer experience, new efficiencies and more revenue?
A 2021 analysis from O’Reilly found that 90% of businesses use cloud computing, and almost half (48%) plan to migrate at least 50% of their applications to the cloud in the coming year. The sooner that financial institutions embrace a move to the cloud, and the tools to protect their cloud systems, the sooner they can start to tap the benefits that come with being an intelligent, customer-focused, cloud-native business.
Bucky Porter is a financial services industry analyst for Windstream Enterprise, a leading managed communications service provider. He has more than 20 years of banking experience in roles such as regional branch leadership, technology consultant, and senior lending officer with community, regional and national banks.
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