Banking on the cloud? (Part 1)
Recently released data has shown that increased use of cloud and IT outsourcing could be on the cards for banks and insurance companies.
But how exactly will they adopt it, considering that until now it has been largely regarded with scepticism by the sector? Procurement expert, Daniel Ball of Wax Digital, outlines what financial institutions are doing to source, manage and maintain a cloud infrastructure suitable for their unique market conditions.
While other industry sectors have forged ahead with its adoption, cloud computing been approached with considerable caution across the banking and financial services sectors, and in many ways rightly so. In a highly regulated environment where data security is paramount, putting critical business processes and data in the hands of a third party without close scrutiny could easily spell trouble. Let’s face it, no bank wants to be the one that chooses cloud and ends up embroiled in the scandal of a major data breach.
Banks face a rather unique position. On one hand they must be doubly secure; the ramifications of the banking crisis and recession still echo through the corridors of every institution. On the other hand they know they need to change to compete in the future, with greater customer centricity and improved operating models key watchwords. According to PWC’s Banking 2020 research, 61% of bankers consider a customer centric business model to be very important, but less than 20% of them are very prepared for it. They’re crying out to change as businesses but must do so with the utmost caution.
While the wrong approach to cloud can definitely expose banks to risk, outsourcing IT and moving the right things to the right form of cloud can be positive steps in enacting changes, such as reducing fixed overheads, downsizing internally and shifting focus from complex processes to where time should be really spent – on understanding what the customer wants and delivering it. Cloud can also go beyond tidying up the back office. It can also drive innovation by allowing a bank to take advantage of new technology and expertly executed business processes.
And this seems to be where the industry’s view now lies. Indeed, in recent research by Finextra 49% of banks said that they will increase IT outsourcing in 2015 compared to just 9% planning to decrease it – suggesting an upward trend in the number of banks entrusting their IT to third parties. Similarly, in a new research study by the Cloud Security Alliance (CSA) over 60% of banks, credit unions and insurance companies surveyed across 20 countries said that they are currently working on their cloud strategy – suggesting that a majority of banks have decided that cloud has a place in their business, but they are still deciding on the right type of cloud for them.