The rise of public cloud in banking and stances on cloud security

Security is a fundamental discussion and many banking institutions have asked this highly relevant question: “Is it safer to keep my data on premise, or in the cloud?”

Andrew Reeves – Head of Temenos Cloud

According to a RightScale report, “State of Cloud 2018” 81% of companies have a multi-cloud strategy. Whilst this is their strategy, the take up of cloud is still slow in the banking sector. Why is this? Is it business and regulation related reasons? Is it the mission-criticality of workloads and the related perceived regulatory constraints? Is it about data sovereignty and / or data governance? Is it the cost commitment to legacy infrastructure and systems? The main fear remains the strength of security provided in the cloud.

One other interesting aspect is that, according to the “State of Cloud 2018” survey, usage of private cloud is starting to go down, from 54% in 2017 to 51% in 2018. What does that tell us? Well it seems that companies are starting to become more open to the idea of public cloud usage, and not just one public cloud, but multiple public clouds to mitigate risk and provide for such services as back up and disaster recovery. Private cloud adoption amongst companies also rose 3%, to 75% in the last year. These are very powerful and high numbers heralding a dramatic shift in the cloud adoption space and not just in banking.

In the financial services industry however, the change is a less dramatic but the imminence of change is still prevalent with an extremely high number of financial institutions starting to raise the par for public cloud usage in APAC. In Australia Judo Capital has created a fully cloud-based, API-centric, technology ecosystem and partnered with Temenos Cloud services enabling them to focus entirely on its customers rather than managing IT systems.

We all are aware that changing the monolithic architectures on which the banks manufacturing and distribution rest is a titanic job in itself and in some cases impossible. The banks have a myriad of legacy and modern systems intertwined and linked, which are challenging for innovation and for regulatory compliance. However, what we are increasingly seeing is the rise in end customer demand for a multi-channel experience that has brought about the urgency of change and a growth of interest exemplified in the number of new projects ( i.e OpenBank) and alliances forming around new technologies, machine learning, AI, biometrics, Blockchain etc. This means banks are aware of the inevitable shift that is upon them and they are preparing or moving. The deluge of Fintech players and discussions around cost of cybercrime and authentication is becoming a pressing matter to the big and established financial institutions facing this apparently unstoppable trend of cloud first. That, together with the realisation that digitisation and regulation will drive innovation lies at the heart of the fast adoption of cloud technology.

Coming back to the pressing security issue then. In 2011, 50% of banks interviewed by Temenos cited data security and confidentiality as one of their biggest hindrances to movement to cloud. According to the most recent Temenos banking survey in 2017, only 22% now worry about data security and 29% see regulation as a barrier to adoption (39% in 2012). There has also been significant progress over the past couple of years from regulators to engage with cloud adoption. Regulators are starting to realise the positive impact cloud can have on boosting competition, creating high quality predictability and enhancing security of the banking ecosystem.

In the UK, the Financial Conduct Authority has published guidelines for financial institutions looking to outsource operations to the cloud, followed shortly after by the Monetary Authority of Singapore and by Luxembourg’s.

Moreover, because we love facts and numbers, one of the biggest cloud infrastructure providers out there, Microsoft, is focusing more than one million servers and around $15B of investment in cloud infrastructure, which includes military grade security with multi-factor biometric entry points. If that is not secure, nothing is. In addition, what we have learned from a Microsoft cloud security survey is that 94% of responders have highlighted higher security benefits, which they did not have on premise and 62% said that privacy increased as a result of moving to the cloud. Security seems not be such an issue anymore and the market obviously sees that and is reacting to it.

Co-authored by Ioana Vintila – Global Cloud Product Marketing, Temenos Cloud

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Andrew Reeves – Head of Temenos Cloud