A quick temperature check of the financial services industry’s attitude to cloud banking last month triggered a warm response.
There are two sides to every story and never more so than when discussing with banks the shift from in-house technology to on-demand cloud-based services. So in our recent survey ‘Cloud-banking heat map’, we asked two key questions: what are the benefits you seek from cloud services; and what, if any, are the barriers to adoption you face?
Banks see cloud as a strategic move that supports innovation
Echoing the results of a similar Ovum survey* last year, our survey results show that cloud is no longer just about cost reduction, as 50% of respondents see cloud as a means to adopt new technology, and 34% reported the ability to add new business functionality more quickly as a top benefit. This is a very encouraging sign that banks are seeing the adoption of cloud technology as a means to support the delivery of new products and services.
That is not to say that the long term cost benefits of cloud services are any less important. In fact the highest scoring benefit sought from the cloud, at 58% of respondents, is to reduce overall IT costs. Not at all surprising given the profitability hit banks have taken post financial crisis, cost-savings are an obvious driver of a cloud-based IT strategy.
The cloud barrier paradox
The top reported barriers to adopting cloud services are concerns over data security (55%) and reliability and availability (47%), which are common challenges for financial institutions that are used to managing and maintaining their own IT. This highlights the need for cloud providers to do more to demonstrate to the industry the robustness of their security controls and availability metrics, as paradoxically we may find that security and reliability is a benefit rather than a barrier to cloud.
Concern over regulatory compliance is another top factor against cloud banking, cited by 45% of respondents. This is no surprise in such a heavily regulated sector, and there is no quick fix, but when talking to lawyers in this space, the feeling is that with a high level of due diligence on the on the banks' part, and a transparent and collaborative approach on the cloud provider's part, a solution could be found that meets all parties' needs, including those of the regulator.
So what's next?
As the industry continues to warm up to cloud banking, we will see the same issues raised and discussed again and again. And rightly so. The only way to support the banking industry in any leap in technology and faith, is by addressing issues and challenges openly until all parties are convinced of its viability.
Find out more about Temenos cloud banking solutions here.
*The Critical Role for Cloud in the Transformation of Retail Banks, Ovum 2014