There is a big technology trend taking place in the financial services sector right now. Despite concerns about meeting the sector’s high security and compliance standards, the benefits of cloud are being realised and adoption is on the rise.
According to a 2015 study by NaviSite, 50 per cent of financial services businesses in the UK were found to have migrated between one-quarter to half of their IT infrastructure to the cloud.
A staggered approach
It is often said that cloud service providers can help manage the complexity of the IT environment, and provide flexibility and scalability at lower costs. But the financial sector is also often known for its reliance on mission-critical legacy applications. Cloud computing providers are therefore proving a valuable resource for helping with the difficult task of migrating these legacy applications – a topic covered in a previous piece in the “99 Problems but the Cloud Ain’t One” series.
More often than not financial companies start with a conservative approach to the cloud, mixing on-premises and private cloud services, before eventually migrating suitable parts of their infrastructure to the public cloud. As one of the more heavily regulated industries, there’s good reason for this. By their nature, financial service firms deal with sensitive information of both individuals and businesses – but security perceptions of the public cloud are shifting.
Encryption and masking offerings are now readily available cloud security options that help address many of the sector’s concerns. However, not all databases are cloud-friendly in licensing terms, and for heavily regulated industries and the solution is often about working with cloud providers to find and tailor the right solution to meet industry requirements – whether that is for a private, public or hybrid cloud implementation. For effective management of a financial service cloud infrastructure, there should also be clear areas of responsibility set out between internal IT teams and third party cloud providers.
In spite of the security and regulatory concerns around financial services and cloud computing, certain online services have already become the norm. Functionality such as banking online and through phone apps are now seen as basic, indicating that we may already have more confidence in cloud computing for our financials than we realise.
More Data, More Money
The adoption trend in the financial sector is in part due to realising how the cloud is changing the way data can be used to interact with customers. The exchange of information is crucial for the financial industry and becomes a success – or failure – point for these firms. Transactions in the financial sector are time sensitive and, if delayed, can mean the difference between monetary gain and monetary loss. Agility, reach and time to deployment are therefore key motivators for the adoption of cloud services.
Financial firms typically have high storage demands due to the large amount of transactional, personal and complex data they require to operate. The faster they are able to process and analyse these large quantities of data increases their ability to understand and predict customer behaviour and needs. This means they can create better, more timely services for customers. Due to its natural elasticity, scalability and flexibility, the cloud is an ideal platform to both store these large volumes of data, as well as to develop and test new analytics applications.
Digital-first financial companies, such as app-only banks, are today disrupting the industry and challenging the big financial service players. It’s clear that these firms will need to harness cloud capabilities to manage and analyse data, to be cost effective, and to become faster at developing and rolling-out new services to customers.
Vivek Vahie, senior director at NaviSite India
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