• Jerry Mulle, UK MD at Ohpen


• 26.04.2022 02:30 pm
#cloud #banking #innovation

The financial services industry has been on a digital transformation journey for a long time now – but

it's time to up the pace of change. The call for better, faster and smarter technology is louder than

ever, most clearly heard in terms of being able to provide a better service and solutions for

customers. However, we’re now seeing FIs needing to tackle other emerging facets, such as ESG.

While both priorities can seem mammoth in isolation, and are sometimes thought of in silo, this

most certainly shouldn’t be the case. In fact, by upping the pace of digital transformation, FIs could

find that they are actually able to address ESG demands simultaneously.

The fact of the matter is that emerging technologies such as open banking and the cloud are fast

becoming the great enablers of change – of making our industry greener, more innovative and more

productive. By embracing these technologies, organisations in the space are not only better placed

to deliver the products and services their customers need anytime and anywhere, but they will

benefit from increased operational efficiency, lower running costs and a smaller carbon footprint.

It’s a win-win set up.

Green is growing – but this calls for an equal appetite for tech

The demand for green financial products is continuing to grow across the globe. It is becoming

increasingly clear that this is no passing trend, but a new reality. We need look no further than the

fact that sustainable finance is now worth $35 trillion globally, according to the most recent Global

Sustainable Investment Review.

Younger, digitally-savvy consumers are driving this demand even further. Not only do they want a

streamlined and simplified financial life, but one that aligns with their values. For example, a 2019

survey by Allianz found that 64% of millennials are likely to make investment decisions based on

societal problems that are important to them.

And these demands are not going unheard – they're getting institutionalised. Today, stakeholders

and regulators are demanding ever greater transparency on banks’ ESG goals and progress. We’re

seeing reports from KPMG, EY and Deloitte all pointing to the growing interest stakeholders have

across professional and financial services in knowing how institutions are adapting their business

models to create value for both business and society over the long-term.

But the question remains – how can this be better realised? As already alluded to, the first step is to

see that these two factors – the call for sustainability and the demand for better technology that

delivers better service – are related. And while these demands might be coming from different

fronts – investors, employees, stakeholders and regulators – they can be reconciled with a single

solution to begin with: technology. Specifically, the cloud.

The cloud’s green credentials

There are high hopes for the cloud in helping financial services become more sustainable. One of the

most encouraging factors is that cloud computing is forecast to prevent over 1 billion metric tonnes

of CO2 emissions between 2021 and 2024, according to International Data Corp. Compared to

traditional IT set-ups that rely on in-house datacentres, cloud technology is more energy-efficient,

and can lower carbon emissions by up to 80%, aiding institutions in implementing their sustainability

strategy. To be more specific, cloud-based solutions and infrastructure can reduce a firm’s carbon

footprint in three key ways.

Firstly, migrating from large, on-site premise datacentres to the cloud reduces the energy

consumption and emissions a firm might produce. Even among cloud service providers, banks and

FIs can pick greener and cleaner partners to store their data, or sites that have an established track

record of operating sustainably. In short, institutions can take more control of where and how their

operations are run.

Secondly, the cloud offers better overall energy efficiency. Many banks have rooms full of servers

running hot that require constant air-conditioning. Built with modern, sustainability focused design

in mind, datacentres from which clouds are run have computing output that’s 6 times greater than

legacy technology and with only a 6% increase in emissions compared to legacy technology. That’s

running a lot more and paying a lot less in emissions.

And finally, decommissioning old IT systems and switching to a cloud-native platform can enable

significant cost reductions. As data, server storage and performance power continue to become on-

demand services, this gives institutions the ability to scale up and down as needed. With more

money and energy spent on running IT equipment rather than cooling the environment for that

equipment, banks and financial institutions can increase their efficiency and green credentials just by

making the switch to the cloud.

Of course, migration is a big step. While for some it can be daunting and disruptive, it doesn’t need

to be. It can instead be part of a progressive transformation where the migration is supported by

specialist partners in the space through a methodical, bit by bit process rather than being replaced

all at once.

The ‘S’ and the ‘G’ priorities helped by the cloud

Of course, there’s more than just environmental concerns to contend with. With increased

efficiencies and smarter technology brought by innovation, financial services are better placed to

deliver socially beneficial and more ethical products and initiatives. We can do this by reimagining

and redesigning historic products to function in a digital and sustainability-first age.

We’re already seeing this in the Netherlands as part of our work with providers of sustainable

financing for affordable housing associations, schools and homeowners. By empowering partners

with cloud-based technology, it can not only increase efficiencies for an institution, but also simplify

some of the most laborious milestones in a customer’s financial life to become a greener and more

accessible process.

In addition to this, the increased computing power of the cloud enhances predictive data analytics,

helping banks identify clients who could come into payment difficulties during credit risk

evaluations process. With this better data, banks can work closely to support vulnerable customers

as they come out of COVID-19 and help them plan their financial lives.

Digital transformation is a journey we started long ago, but by further embracing the cloud, we can

deliver even more. The importance of better, smarter and greener technology is not just a matter of

cutting costs and working faster. It’s a means to help improve the lives of our customers, being

kinder to our planet and reflecting the modern needs of today’s investors, regulators and wider

society.