After long crawl, cloud adoption accelerates in financial sector
The financial sector has been notoriously averse to embracing the scale of digital transformation that has transformed other industries from the top-down (think Industry 4.0, IoT in Healthcare, virtual dressing rooms, etc.). While banks of all sizes have adopted cloud computing for non-core functions, many still rely on legacy, hardware-defined workflows when it comes to business-critical operations and customer transactions.
This is rooted in the fact that financial services collect vast amounts of personally identifiable information (PII) from customers that require strict protections -- especially in an age of increased regulation, ala GDPR and California’s Consumer Privacy Act.
But the tide has been turning, and it was really only a matter of time when you consider how far-reaching cloud migration and digital transformation has been in industries that dovetail the financial sector (which, realistically, accounts for any enterprise or individual in need of a bank account).
The ramp up in cloud adoption across the finance space can primarily be attributed to a few key factors, mainly: The emergence of trustworthy regulatory SaaS technology (regtech) and disruptive financial technology (fintech).
Regulation fueling cloud migration rather than stymying it
It may seem counterintuitive, but the jump in regulatory standards in the recent past has been an unlikely boon for the introduction of new cloud-delivered tech in the financial space, not a deterrent. The conventional wisdom is that when data leaves a private data center, the security vulnerabilities are so great that it’s not worth the risk for financial services to unload their hardware. But between 2008 and 2015, regulatory change has increased by 492 percent, which has called for companies to quickly adopt strict protections and transactional standards, lest they be on the hook for hefty noncompliance fines.
Just how companies have adopted SaaS solutions to help them quickly adopt and deploy new workflows without exhausting their budgets, regtech solutions delivered “as-a-Service” can help teams contend with the unprecedented rate of regulatory change without slowing down their ability to support and grow their customer base.
Regtech can offer consistency of regulatory application, speeding up the time it takes to identify information and documentation that requires specific protections or permissions. This kind of software also can evolve immediately with new regulation, putting the control burden on the regtech provider to stay on top of best practices opposed to financial IT.
Fintech emerges in tandem with changing consumer tastes
The rise of fintech has been less of a response to how banks can function than a reaction to both consumer tastes and industry disruptors. As consumers have become more accustomed to using mobile apps for practically every transaction (from Venmo to Zelle to ApplePay), traditional banks need to look into developing their own solutions to stay competitive.
This signals a big departure from the days when digital transformation was only considered the realm of retail banking. Today, corporate, commercial, business and investment banking clients all demand fast and convenient digital experiences akin to what’s available through every other channel they interact with in their day-to-day lives.
We’re approaching a tipping point in our society where an entire generation will have grown up in a primarily digital world by the end of the decade. Regardless of industry, the businesses that are able to deliver value and convenience through digital channels are the ones that are going to succeed in the future. That means old-school banks will need to shake off their fears about moving to the cloud, leverage solutions that help them implement new workflows with ease and security, and maintain visibility across their networks.
To learn more about what teams should consider as they retire their legacy workflows, read our latest whitepaper, “Direct Internet Access (DIA): Rethinking WAN for the Cloud Era.”
Tags: cloud adoption, cloud migration, digital transformation, finance, finance tech, financial sector, financial technology, fintech, network performance, network performance monitoring, regtech, regulatory technology