By John Clarke, Principal Cloud Advisor, Cloudreach
Financial services has always been an early adopter of new technology. In the 19th century, for example, banks were quick to make use of newly-laid transatlantic cables to trade bonds, currencies and stocks with unprecedented speed and efficiency. From the 1950s onwards, the arrival of mainframe computing with punch card, paper tape and magnetic tape I/O systems, similarly proved fitting to the industry’s needs by digitising potentially thousands of lines of customer, transaction and capital data at huge scale.
The natural affinity between the financial sector and IT is best demonstrated today by the industry’s rapid adoption of cloud computing. According to research conducted by IDC and Cloudreach, over 70% of financial services organisations have either recently migrated or are in the process of migrating to the cloud, showing a clear lead over the manufacturing (65%), media & entertainment (60%), retail (44%), and transport & logistics (44%) sectors.
An inflection point in the adoption of technology in the financial services industry
The pandemic has been a significant catalyst in pushing all industries to the cloud. Nowhere has this been more true than in the financial services sector. According to the survey, 82% of respondents in the financial services industry cited the pandemic and an increase in remote working as a trigger for moving to the cloud, significantly higher than the cross-industry average of 65%.
But why did the pandemic have such an impact on cloud adoption in the financial services industry? The explanation lies in the accompanying events that respondents identified: 74% cited regulatory changes (e.g. GDPR, Schrems II) and 66% said the need to improve security, both of which are markedly higher results than the cross-industry averages (58% and 49% respectively).
To enable staff to work from home and allow customers to access products and services remotely, all while meeting high-level security and regulatory requirements, accelerating cloud adoption was a no-brainer for financial services organisations. But aside from simply solving existing problems, the cloud has also brought significant benefits.
What are financial services companies achieving?
When it comes to the benefits financial services organisations are realising as a result of adopting cloud, the results speak for themselves. According to the IDC study quoted above, on a scale from 1 (no impact) to 5 (significant impact), the areas where financial services have felt the most empowered to innovate after moving to the cloud are: user customer experience (3.82), operating model (3.79) and the overall ecosystem of supply and value chains (3.45). In addition, organisations also report being more prepared to address economic recession (4.11), data privacy (3.74) and business continuity (3.71).
The results also demonstrate that organisations within the sector are using the cloud as a solid foundation on which future digital initiatives can be built. The most commonly cited among these were: enabling the use of sensors enhanced with advanced and predictive analytics for better decision-making (92%), improving collaboration across internal functions (84%), and creating more resilient supply and value chains (79%)
Advice for those embarking on a cloud migration journey
The past 18 months have shown how unpredictable the world can be and how abruptly the status quo can change. From a broader perspective, therefore, the ultimate goal that organisations should have in mind when moving to the cloud is to become future-ready.
What does it mean to become future ready? It means having the agility to enact massive change without causing major disruption. It means opening up new efficiencies to achieve more while using fewer resources. Crucially, it means having your sights set on completing digital transformation, a stage at which 29% of financial services organisations report they have reached, significantly more than the 21% cross-industry average.
Based on what the most successful financial services organisations are doing, here are some key initiatives that help make the most of digital transformation:
#1 – Automate migration processes
AI/ML algorithms can remove the burden of mapping out dependencies within an organisation’s core infrastructure, while also finding opportunities to modernise the cloud estate. In so doing, financial services organisations can leverage native could technologies and architectures to reduce costs and drive efficiencies in application development and operation. This will significantly accelerate the speed at which enterprises can plan, launch and continuously track their cloud modernisation strategies.
#2 – Leverage the power of DevOps
Practices such as continuous integration/continuous delivery (CI/CD), which are part and parcel of DevOps, help bridge the gap between development and operation activities, further increasing speed and agility. Organisations can also take advantage of DevOps as a Service solutions, which make this expertise accessible via a simple and flexible monthly subscription, rather than spending money hiring hard-to-find DevOps talent.
#3 Experiment easily and safely
Creating a solid foundation for your cloud migration is essential for innovating securely and effectively. With correct skills, governance framework and technical design, your business can obtain new capabilities and begin experimenting. Inputting guardrails to enable governed experimentation while swapping out legacy technology and delivering new applications is one way of doing this. Many businesses also build and manage their cloud governance by developing a Cloud Center of Excellence (CCoE). This is a central unit of pioneers who are responsible for encouraging change across the business and incubating best practises related to cloud architecture. Their focus is on urging cloud use while minimizing risk and costs.
A model for all industries to follow
Whether it’s improving customer experience, meeting regulatory and security requirements, or being the first to adopt innovative new technologies, the financial services industry is blazing a trail when it comes to using cloud computing to realise digital transformation.
As the results quoted above demonstrate, cloud migration is not simply a matter of addressing specific issues – it’s the next logical step for all industries in both realising and being ready for the future. The ability to experiment and innovate with new solutions via the cloud and deliver higher value services to customers is an imperative, not an aspiration.
But like telegraph cables and mainframe computers before, the cloud is the latest in a long line of transformative technological innovations. And today its benefits and potential applications are now even more evident as businesses look to rebuild after the pandemic. It’s increasingly clear that the financial industry is doing what it’s always done – adapting quickly with the times. Other sectors would do well to follow or face a battle for survival.