Why cloud adoption is on the rise in banking
The banking sector has never shied away from innovation, whether it is new products to improve customer savings habits or new ways of interacting with people and business, but embracing new technologies such as cloud has, until recently, been relatively slow. However, leading global financial institutions such as Goldman Sachs and Deutsche Bank have accelerated their adoption of cloud, which can provide insights for efficient technology transformation across the sector.
We conducted research to measure 21 medium-size and large banks’ sentiment and operations regarding cloud technology. Examining the relationship between cloud technology and banking professionals, our research provides an insight into the overall finance sector’s perception of cloud technology and how its application can improve banking procedures and efficiency.
A significant trend showed that the way people use their finances and banking systems has changed, particularly when it comes to payments and transfers. Our research revealed 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 moving to the cloud.
In the world of retail banking, buy-now-pay-later, open banking, and contactless payment systems have revolutionised the way people use their bank, making financial management easier and more efficient. However, despite these evolutions, high street banks are playing catch-up to the challenger banks who possess fewer legacy processes and, therefore, an easier migration to new technologies, such as the full utilisation of cloud and artificial intelligence.
The cloud provides a dependable, scalable, and flexible data system that allows traditional banks to modernise quickly and stay abreast of the innovations that ‘born-in-the-cloud’ challenger banks are bringing to the market. An increasingly popular way of doing this is by adopting a hybrid and multicloud approach.
Most organisations are considering diversifying their cloud technology, with 76% of bankers now agreeing with the importance of implementing multicloud systems in order to benefit from resilience and security improvements made by the main cloud providers. These cloud ‘hyperscalers’ also provide regular updates and continue to release exclusive new services and platforms as they continue to innovate.
Our research indicates that cost optimisation is a primary reason that banks are looking toward the cloud for their future storage needs, with 81% of bankers confirming they have adopted cloud technology to save costs.
Installing and maintaining on-premise IT systems is lengthy and costly for financial institutions. When using the cloud, however, purchasing and installing hardware is no longer required as the cloud service provider hosts all the required infrastructure. The management of the hardware is included within this, reducing the overall cost of IT support further.
Technological innovations are usually heralded for their ability to streamline operations, making them quicker and more secure. Our research 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, since banks can spend fewer resources managing the relationship between trading volumes and payment infrastructure. Bankers acknowledge this opportunity, with 95% of organisations understanding that cloud technology can reduce time-to-market.
Overcoming misconceptions with cloud technology
Misconceptions usually exist around any emerging technology and our research found that this theme continues with cloud technology.
43% of the bankers we spoke to admitted that security concerns have impeded full cloud migration – a concern that has frequently been confirmed when speaking to financial services institutions. However, cloud providers invest heavily in the security of their cloud infrastructure which, as a result, makes it almost always safer than its on-premise, client-owned counterpart.
One aspect of adopting the cloud that continues to cause concern, is that which is commonly termed the ‘digital skills gap’. More than half of banks claim 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 all sectors, including banking, and have committed to training and encouraging young people to learn the required skills and enter the sector. We recently launched our Manchester Innovation Hub – a dedicated location to support the upskilling and growth of tech roles in the north.
Going forwards, cloud technology is the primary option for banks seeking to evolve and scale their business, whilst minimising risk, time and cost. Bankers recognise these benefits and the overall findings of our research suggest they will continue to grow their investment in cloud technology. Whilst evolving traditional legacy systems is very challenging, cloud technology continues to advance and we believe that over time it will become a powerful mainstay within the financial services industry.
You can find out more about GFT and cloud innovation by downloading our latest thought leadership paper here