Decisions and opportunities: The Cloud as the standard for modern-day banks (Roel Jansen)

The financial industry transformed in the past decade significantly in the way they serve their clients, banks seek greater speed and agility through cloud adoption. Many banks were confronted with significant barriers during the first phases of cloud adoption, and  now are challenged to push down costs, manage security issues, and require better data capabilities. This limits the benefits and efficiencies that banks reap from adopting cloud strategies. 

As pointed out in a survey of McKinsey [1] earlier this year some organizations struggle with the pitfall of lift & shift strategies. Although these organizations moved their technology into the public cloud, they still largely replaced on-premise technology with off-premise virtual machines. That results in few benefits in flexibility but in many cases increased operational costs. Also, the investment effort is not repaid with modern-day functionality or integration capabilities. And exactly those capabilities are required when banks want to  

  • cater to new consumer behavior, and  
  • deal with increasingly more complex data demands from regulators. 

Disruptive banks and FinTech do utilize the cloud for their neo initiatives. It allows them to keep their costs low, leverage increased integration capabilities for a composable architecture, and run much leaner organizations through SaaS delivery models. 

The established banks recognize the trend and look to deploy either existing or newly adopted technology in the cloud. A recent survey of Google [2] shows that a sizable portion of financial services organizations are utilizing the public cloud. It reports that 80% utilize the cloud as part of their primary infrastructure. This means that today’s benchmark in banking is the cloud. It also shows that the public cloud helps nearly all respondents (88%) to tackle major challenges that include regulatory compliance. A different survey by EY [3] points out that cloud adoption reaches 80% for generic functions like collaboration tooling, but production applications and supply chain applications are still far behind at less than 30%. 

The core banking function is addressed later in the cloud transition for various reasons. In the past decade, banks have heavily invested in creating internet touchpoints for internet and mobile banking, and more recently adopted cloud-based collaboration tooling following the Covid-19 pandemic. As banks clearly are rewarded with significant efficiency and functionality gains, it has increased the appetite to also apply a similar strategy for core banking. Today large investments are still required to keep the status quo for on-premise core technology, and therefore the opportunity is immense to make the shift to a modern cloud-native alternative that delivers on data insights, security, integration capabilities, and flexibility to adapt to rapidly changing requirements from either the market or regulators.