In a rapidly innovating technological world, banks need to follow the lead of the fintechs and embrace cloud computing. If they don't, they risk being left behind.
Banks need a cloud-first strategy – today, not sometime in the future. Cloud computing offers financial institutions much more than just a cost-saving exercise (though the cost take-out can be considerable); it provides a level of scalability and agility unattainable previously, whether through infrastructure-as-a-service, platform-as-a-service or software-as-a-service models.
By tapping cloud, banks are no longer constrained by the limits of proprietary data centres and can add new capacity within minutes. They then have the ability to move into new jurisdictions more quickly, as well as spin up and test new offerings much faster, reducing the time-to-market cycle from months to weeks.
Most importantly, the move to cloud can act as a catalyst for deeper re-engineering and automation of processes and workflows, especially in the middle and back office, as banks strive to digitally transform their business.
Cloud promotes a completely different way to construct and roll out technology. Increasingly, banks are looking at application programming interfaces and microservices-based configurations available in cloud, which allow them to pick best-of-breed of both open source and licence-based products.
Many new challenger banks and fintechs are building cloud-native businesses and show no sign of bringing their core systems on premise. So the proof points are already live in the market.
For most institutions, however, it is a big leap to go from on-premise hardware and software to running core systems in a public cloud, with data security being the main concern. So many are taking an intermediary step and deploying a private cloud, either on or off premise, to gain expertise and become more comfortable with cloud technology.
But it is the shift to public cloud that will drive the true benefits through being able to access the accelerated innovation cloud providers are capable of. Amazon, for example, released more than 1000 new features and services in 2016 alone – no bank alone can keep up with that speed of innovation.
In the age of big data, artificial intelligence, machine learning and neural network processing, banks that want to keep up with the more advanced frontiers of analytics will only be able to do so with their feet firmly in the cloud.
