• Alpesh Tailor, Executive Director at digital transformation specialist at GFT


• 06.01.2022 09:00 am
#banking #cloud

Banking firms have long adopted evolving technology to ensure the success of their operations, but the rise of cloud and the multitude of its utility has not yet been fully embraced by the majority of banking institutions. With leading international financial institutions such as Deutsche Bank and Goldman Sachs now migrating their operations to cloud technology, the migration is certainly set to accelerate. 

To understand what’s driving this transition, we conducted research using a global survey methodology to measure the sentiments of 21 international banks of all sizes regarding cloud technology. Aiming to assess the relationship between cloud technology and banking professionals, the research detailed the finance sector’s perception of the cloud and how its application can help revolutionise banking operations. One of the key findings of the research is that bankers now widely recognise the benefits that cloud technology provides - a significant step forward for an industry that until now has been slow to adopt the cloud. 

Scale-up abilities

Our research demonstrated that those within the banking sector understand the cloud’s proficiency for scaling up. We found that 86% of bankers have adopted cloud services to harness its virtually unlimited scalability, citing a definitive change in transaction behaviour as the main reason for adopting cloud. 

The way in which people use banking systems is modernising every day. We’ve transitioned away from physical money towards digital payment methods. Contactless credit cards, open banking, and Buy-Now-Pay-Later systems have all made transactions more efficient for customers. The traditional high street banks are having to play catch-up with the challenger banks leading the way with their accelerated use of cloud making it easier for them. 

However, the traditional banks are moving fast, as they modernise quickly and stay abreast of the innovations which the neobanks are bringing to market. The cloud provides a dependable, scalable, and flexible data system that is allowing traditional banks to press ahead. One increasingly popular way of doing this is their adoption of a hybrid and multicloud approach.

The benefits of working with a single ‘hyperscaler’ such as AWS, Google Cloud or Microsoft Azure are outweighed by the benefits of adopting a multicloud solution, with each of the providers offering on-premise and multicloud management consoles. As evidenced by our research, more organisations are considering diversifying their cloud technology, with 76% of bankers highlighting the importance of multicloud systems. 

Cost optimisation

Using the cloud for cost optimisation is a primary reason the technology is building traction in the financial sector. Our research indicates 81% of bankers adopted cloud technologies to save costs. 

Installing on-premise IT systems is lengthy and costly for large institutions like banks, although this has been the experience over many years. When using the cloud, however, purchasing and installing hardware is no longer required, as the cloud service provider hosts all of the storage hardware themselves in their own datacentres. The management of the hardware is also included which will reduce the overall outsourcing of IT support.

The high cost of acquiring dedicated hardware has, in some cases, limited the ability of smaller banks to scale up, leading to a decrease in banking versatility. This has limited consumer choice and fintech innovation. However, cloud technology is set to change the monopoly due to its accessibility and lower cost. This is key to considering the future of banking, as increased competition should drive more innovation in the sector. 

Organisational inertia 

Our research further illustrates that 62% of bankers believe organisational culture and inertia to be a key challenge within the sector. Besides being flexible for scalability and cost, adopting cloud technology can bolster organisational efficiency as banks can spend fewer resources managing the relationship between deal volume and payment infrastructure. Bankers acknowledge this opportunity, with 95% of organisations studied confirming that cloud technology can reduce their ‘time-to-market’.

Overcoming misconceptions with cloud technology

Misconceptions usually exist around any emerging technology and our research found that this is certainly the case with cloud. 

43% of the bankers we spoke to admitted that security concerns have impeded full cloud migration - a concern that we have been told frequently when speaking to financial services institutions. However, cloud providers invest heavily in the security of their cloud infrastructure which, as a result, usually makes it far safer than its on-premise, self-managed equivalent.

One appropriate concern around cloud technology is the ‘digital skills gap’. More than half of banks claimed a lack of cloud-savvy employees internally has slowed down adoption. At GFT, we understand that this is a major issue for the adoption of cloud technology in banking and other sectors and have committed to training and encouraging young people to enter the sector. We recently launched our Manchester Innovation Hub - a dedicated location to support the upskilling of tech roles. 

Going forward, cloud technology is the primary option for banks seeking to evolve and save time, costs and risk, not to mention provide unlimited scalability. Bankers recognise these positives and the overall findings of our research suggest they will continue to accelerate investment in cloud technology. We are confident that whilst the evolution and optimisation of traditional legacy systems are finite, cloud technology will continue to evolve to become a powerful mainstay within the financial industry.