• January 26, 2017

High Hopes: 4 Reasons Banks Are Headed to the Cloud

The benefits abound for financial services enterprises that move to the cloud.

In the next three to five years, “the financial services ecosystem will dramatically evolve in terms of players, products, and customer engagement strategies,” says Daniel Biondi, Chief Technologist, Financial Services, Asia Pacific & Japan, and Fellow, Enterprise Services, in an Enterprise Forward article earlier this year. He went on to explain that the winners “will be the institutions that understand the critical relationship between customer-centric banking and modern technology.”

One of the key enabling technologies that Biondi was referring to was cloud computing. Over the past several years, a growing number of banks, including Capital One, Goldman Sachs, and the World Bank have begun entrusting their data to public and private clouds while still being compliant with regulations (e.g., data sovereignty). Meanwhile, earlier this year The Wall Street Journal reported how Amazon Web Services has been courting the likes of JPMorgan Chase and Citigroup, among other big banks.

By moving to the cloud, these and other financial institutions will have the opportunity to fundamentally change the way they do business, so they can operate more efficiently and better meet the needs of their customers.

For example, a move to the cloud will allow banks to:

  1. Reduce their costs. By replacing legacy banking systems with cloud-based alternatives, banks have the opportunity to consolidate their IT spend and hence contribute to a reduction of a key metric of cost-to-income ratio. This cost savings will not only give banks a competitive advantage by allowing them to save millions in IT expenses, but it will also free up resources that can be diverted to creating better customer experiences.
  2. Create greater security. While security is a top concern for everyone in the financial services industry—and was historically a sticking point for cloud adoption—the right cloud platforms can actually provide greater safety than legacy IT systems. To ensure the desired level of safety, banks need to take care in partnering with reputable cloud providers that have enterprise-grade security-focused technologies such as SSL management, credentialing services, and public key infrastructure built into their offering.
  3. Tap into the power of Big Data and analytics. Today’s banks are literally sitting on vast treasure troves of data about their customers. By leveraging the cloud to store and analyze that data, those banks will be able to turn data into actionable insights and provide a better customer experience. This will be coupled by helping customers with everything from hyper-targeted marketing and optimized transaction processing to personalized wealth management.
  4. Promote mobility. Like every industry, mobility is a priority for banking. By utilizing the cloud, banks can not only make data more readily available to customers via mobile apps, they can also gain access to a variety of cloud-based tools critical for ensuring that those apps are secure. For customers, the combination of greater accessibility and security is a win-win.

As banks transition from weary adopters of cloud to full-fledged enthusiasts over the coming years, we’re going to see major changes in the financial services industry. That’s good news for customers looking for more from their banks, because they’re the ones who will reap the benefits.

Like this story? Learn more about security in the financial services sector and why it’s the perfect time for banks to be FinTechs.