Cloud adoption has changed many industries for the better. But how will cloud adoption factor into the financial services industry’s future and growth? Will it accelerate the industry or slow it down? Let’s first look at the industry’s changing behavior.
Thousands of third-party developers are building applications to help people better manage their finances. Many banks are actively partnering with these developers to hold onto existing customers and attract new ones. Accenture estimates that new business models could impact as much as 80% of current bank revenues by next year.
Consumer banking habits are also changing. Last year, Gallup released some surprising statistics on the way Millennials interact with financial services firms. Most telling:
- 92% of Millennials used online banking services, and 79% used mobile.
- Only 66% of Millennials visited a physical bank branch within the past 6 months.
- Only 30% of Millennials said they were fully engaged with their bank.
- Millennials switch banks 2.5X the rate of other generations.
Although Millennials may have a different approach to wealth-building than preceding generations, it’s still an important goal. A recent survey found that 66% expect to become wealthy. (MagnifyMoney)
The mandate is clear. To reach the next generation of investors (and the ones to follow), banks need to reimagine their business model and what it means to engage customers. They are going to have to digitally transform.
Financial services’ cloud adoption report card
Digital transformation can involve many exciting new technologies: Machine Learning, AI, and Blockchain, just to name a few. However, digital transformation initiatives should start in the cloud.
So how are financial institutions doing when it comes to adopting cloud computing? There’s good news and bad. On the plus side, financial institutions clearly recognize the importance of cloud computing. In fact, 51% are already using public cloud services, with another 16% planning to do so. Almost half (49%) have deployed workloads in an on-premises private cloud, and 39% are using cloud platform-as-a-service (PaaS), most likely as a private, hosted cloud. (451 Research)
However, those percentages inflate the state of cloud computing adoption in the financial services sector. The majority of respondents (69%) said their cloud adoption was only at the discovery, trial, or initial stage of implementation. And, when you look at the primary platforms deployed by financial institutions, only 29% primarily deploy workloads in SaaS (14%), public cloud (9%), or hosted private cloud (6%). The rest of them primarily use hosted, non-cloud infrastructure (11%), an on-premises private cloud (15%), or traditional, on-premises infrastructure (44%) instead.
Transformation requires cloud adoption
The latent state of cloud adoption, especially public clouds and private, hosted clouds doesn’t bode well for the success of digital transformation in the financial services sector. Low levels of adoption mean that many of these organizations likely have working capital tied up in on-premises data centers, and they’re paying a significant amount of overhead just to keep these systems operating.
The challenge is that IT professionals with the needed skill sets are hard to find, expensive, and difficult to retain. Nearly half (46%) of firms told 451 Research they lacked basic cloud platform expertise, and 42% said they didn’t have the IT security skills needed.
Digital transformation will require financial institutions to bridge those skill gaps quickly. They’ll likely need expertise in multiple cloud platforms, both private and public. They’ll need IT security professionals that can keep up with the ever-changing security threat landscape. And, they’ll need individuals with skills in other areas like disaster recovery and business continuity.
Some organizations aren’t convinced and may still be reluctant to adopt the cloud because of regulatory/compliance concerns, cybersecurity threats and/or giving up control in general. In the next part of our ‘cloud adoption in financial services’ series, we will explore (and debunk) some of the most common myths associated with cloud adoption. Subscribe to our blog at the bottom of this page to be notified when new posts are available.
Are you considering a move to the cloud?
It’s a tall order for any financial institution, especially one that is behind the digital curve. Working with a qualified managed services provider can help you jump start your digital transformation.
We can provide everything from remote hands assistance to help you manage your on-premises infrastructure to colocation services that allow you to house your systems in one of our data centers. We have nearly forty of them, so you have plenty of locations to choose from. When you’re ready to migrate to the cloud, we can help you choose the right cloud for each workload, create a migration plan that keeps your data secure every step of the way, and provide additional managed services to ensure the availability and security of your systems. Like to learn more? Contact us to speak with an expert.