For organizations providing financial services, cloud adoption is a critical foundational step on the path to digital transformation. It catalyzes innovation and business growth in a competitive landscape of evolving customer expectations and digital imperatives.
Banks and financial institutions embracing cloud-based technology can benefit from a more resilient, scalable, secure, and agile business model that helps them accelerate the time to market for their innovative services and create frictionless customer experiences. However, many organizations have yet to fully capture the tremendous value that cloud computing offers, estimated to be over $1 trillion for Fortune 500 companies alone.
While migration to the cloud in financial services is quickly becoming the industry standard for technology, a successful cloud shift is a challenging game. Financial institutions face the complexity of coexisting legacy systems and modern technologies, as well as the need to address security and privacy concerns. So, moving to cloud requires a well-structured transformation strategy, thoughtful planning, and the expertise of a trusted migration partner.
Here’s how your organization can complete the cloud transition in a matter of months and seize the true value of cloud adoption in banking and financial services to fuel growth now and well into the future.
Financial services in the cloud: Key considerations for migration
Every bank or financial organization starting its migration journey charts a unique approach for adopting cloud for financial services, but there are four game-changing considerations that can guide you towards a successful and seamless transition.
1. Eat an elephant one bite at a time
Major transformations don’t happen overnight, especially for traditional, long-established banks that have built trust with their customers over decades. To embrace cloud adoption in banking, industry players need to undergo the evolution of their digital infrastructure and operations by taking small but steady steps to their transformation. One such step is using microservices and containerization which facilitate faster and smoother product launches, simplified compliance processes, instant payment connections, and agility in FinTech app integrations.
2. Take it slow to build confidence
The change that comes with the cloud moving into the finance field is enormous and might be perceived with caution as potentially risky and not worthwhile. During the cloud shift of a bank’s digital infrastructure, instilling certainty in the new system across the entire organization is key.
One effective approach for beginning to use the cloud for banking is to adopt cloud-based solutions as a third data center rather than migrating everything at once. This gradual approach to migration allows stakeholders to get more comfortable with cloudification and build a deeper understanding of its capabilities. It also sets the stage for a seamless transition to the cloud as the primary environment.
3. Make customer needs your top priority
By creating customer-centered strategies with a strong emphasis on activities that bring more benefits to customers, banking and finance players can identify which products and domains should be prioritized for migration. For instance, banks are growingly investing in self-service technology to respond to customers’ preferences for using self-service tools.
A customer-centric approach may also involve a transformation of how IT services departments operate. Enhancing service quality and customer journey is one of the main reasons why financial services companies cooperate with other players. Rather than relying solely on in-house teams of engineers, today IT executives turn to external technology partners to build products that cater to customers’ growing needs and wants.
4. Tap into the advantages of horizontal scaling
Scalability is a critical factor for fast-growing businesses. Going cloud offers the boon of horizontal scaling of solutions and customers, as well as provides autoscaling capabilities to adjust to dynamic growth. Scalability allows for increasing the market impact, acquiring a new customer base, and speeding up a product launch.
To illustrate, cloudifying payment infrastructure can increase payment processing efficiency, boost payment revenue, and eliminate the need for error repair. This transition also results in swift customer onboarding and facilitates payload transformation.
Banking on the cloud: Core value triggers
With all the opportunities offered by the cloud, financial services firms are now moving slowly but surely toward IT cloud infrastructure. So, how can banks or finance players profit from cloud migration?
Strong data protection
Cloud adoption in banking offers a security-first approach that includes highly secure data encryption, an integral element of any online business. By using cloud computing, banks can tap into payment tokenization to achieve global conformity to EMV standards. In terms of governance and regulations, the cloud enables the flexibility to fully secure or grant partial access to specific data. Regular data backups and airtight security frameworks ensure data remains protected and accessible on demand.
IT cost optimization
The reliance of banks on the conventional on-premise model for managing software and hardware causes low adaptability to organization-wide changes and expensive upkeep of equipment. Any change in the IT infrastructure, workload management, and other aspects takes time, causing significant customer downtime.
Through cloud adoption in banking, industry players can manage changes to their IT infrastructure efficiently, which allows them to quickly scale their offerings. Those companies that have migrated their systems are seeing significant cost-efficiency enhancements. A McKinsey research suggests that effective cloud use can lead to a 38% increase in development and maintenance productivity and a 29% improvement in infrastructure cost efficiency.
Higher operational efficiency and business continuity
Through cloud computing, organizations benefit from higher levels of flexibility, fault tolerance, data protection, quality control, disaster recovery, loss prevention, and risk management. Minimized infrastructure investment and reduced setup time provided by the cloud also allow organizations to cut development cycles for their new products, leading to higher efficiency and accelerated market response.
Hosting banking systems on the cloud allows for ensuring a 99% uptime and business continuity — critical ingredients to the bank’s success. A recent example of how Intellias helped a large commercial bank migrate to AWS shows how cloud adoption in financial services helps to future-proof business resilience.
Accelerated product development
By adopting the cloud, organizations get access to innovative tools and capabilities offered by cloud services providers (CSPs). These include containers, microservices, CI/CD, DevOps functions, and advanced serverless architecture. This streamlines product development processes right from the start, speeding up design, build, and ramp-up stages. Consequently, financial providers can quickly launch their products and services to keep up with market dynamics and the fast pace of business change.
Cloud providers offer a robust infrastructure and global reach to quickly scale products across a broader range of segments, geographical locations, and channels. Moreover, organizations get access to the cloud’s instant on-demand elasticity in computing and storage capacity, which is crucial for launching and expanding new businesses.
Scaling up and down empowers financial providers to promptly respond to evolving customer needs and adapt their offerings, providing tailored products to strengthen customer journeys and relationships.
Risks of cloud adoption in financial services
Banks operate with a strong emphasis on minimizing regulatory and reputational risks. There are several obstacles that hinder banks in their future cloud adoption. These are the primary concerns among banks that are hesitant to transition their core systems to the cloud.
The distance between a data center and the cloud services provider can impact system performance due to latency causing delays in key banking activities such as card authorization. Also, moving systems from a data center to a cloud environment can introduce additional latency.
Data residency and security
When data is stored on the cloud, data ownership concerns arise. These concerns are further complicated by regulatory compliance requirements, as a lot of financial organizations are subject to government-imposed restrictions on data storage locations.
Even though most vendors follow robust security practices and comply with global regulations, handing over control of your organization’s data is a huge step to take. To make sure all due precautions are taken to protect confidential financial information, banks must select a reputable cloud platform provider.
Cloud and network outages
Although cloud outages are extremely rare, banks face the risk of experiencing operational disruptions that are beyond their immediate control. Also, if the internet connection fails, accessing critical data becomes impossible. The data recovery process can be time-consuming, as direct access to the equipment is unavailable.
By working with cloud experts having the knowledge and understanding of how to mitigate risks specific to banking and financial systems, industry players can effectively cope with migration challenges.
A proven methodology for financial services cloud adoption
Successful cloud migration is a critical strategic step that must be implemented without disrupting essential business services. It requires a well-defined and adaptable methodology to minimize risks, speed up project activities, and align with the timeline, budget, and objectives of the migration initiative.
The project begins with preparing a project charter and obtaining approval for the business case. The migration team conducts a project kick-off to identify and involve all stakeholders, establish a high-level solution approach, define migration goals, and ensure scope alignment with stakeholder expectations. A project plan and budget are developed, considering resources, licensing, and other factors.
Discovery and validation
During the discovery process, the team examines existing documentation, conducts interviews with stakeholders, and builds an application inventory. Mapping systems to business applications allows for the required visibility into dependencies that must be taken into account.
If needed, the team may perform automated discovery of system assets, explore consolidation opportunities, verify software licensing, and perform a discovery review. By the end of the discovery phase, all essential information is in place to start migration based on key dependencies.
The planning phase begins with building the technical strategy outlining the approach for executing the migration. Based on this strategy, the team develops migration plans and test plans for infrastructure and application components.
Within this phase, engineers also design the target environment, making sure it aligns with organizational design and configuration standards. In addition, the team analyzes the need for asset consolidation, makes necessary adjustments to comply with change management processes, and works to address and mitigate any detected risks.
During this phase, the technical team conducts readiness checks of the target environment and evaluates application performance before proceeding with migrations. Based on the results, the stakeholders agree on a Go/No-Go decision. The team executes live migrations, providing post-migration testing and support. Finally, the team holds a retrospective to fulfill the necessary asset decommissioning tasks.
Three strategic moves to accelerate a cloud shift
Cloud adoption in financial services involves essential transformations that organizations should undertake across three key dimensions.
Source: McKinsey Digital
Strategy and management
One of the most critical steps to seize the value of the cloud is bringing awareness across the organization about its practical benefits.
One approach is to engage with cloud services providers as strategic partners. By striking deals with CSPs, the business leadership can reduce entry barriers, especially costs, and demonstrate organization-wide commitment to the cloud.
The outcome of this partnership is not only securing tangible discounts but also taking a more holistic approach to migration to benefit from the full range of CSP’s services and assets, including ecosystems and marketplaces. This leads to greater alignment and enthusiasm throughout the organization, so many of those previously resistant to cloud adoption now join the initiative.
Another route is to build a comprehensive business case around specific levers and use cases, capitalizing on technology benefits such as highest-level robustness, lower expenses for maintenance and operations, and adaptable infrastructure. On top of that, there are notable benefits for businesses, such as fast-paced innovation uptake and the ability to scale up advanced analytics.
Using this approach, organizations can shift their focus away from the purely theoretical value of the cloud to relying on the business case as a practical roadmap to actual value. This perspective makes it easier for the organization to understand and support migration goals.
The value of cloud adoption goes way beyond mere IT improvements. Moving to cloud is a business-backed initiative that involves changing the operating model so business and technology work together through cross-functional teams. This way, the entire migration strategy aligns with the business value it can potentially generate.
Begin your migration at the domain level, focusing on a complete product, service, or function, instead of migrating different systems randomly. Start with one business area and use it as a model approach that can be scaled to other domains across the organization.
While some companies may start with apps that are easier to migrate, the true value of cloud migration is obtained when these applications work together within a domain. Collaborative teams decide on how much modernization is needed for the applications to capture business benefits. They then create a list of business use cases that can be implemented in the cloud, such as intelligent automation, advanced analytics, and innovative user experiences.
In addition to the IT advantages like improved efficiency and cost optimization, this approach enables organizations to raise the speed of modernizing their applications, enhance data integration, and implement protocols to effortlessly reuse applications or features across different use cases. What’s more, this approach helps businesses cut the time needed to launch new products, leading to higher customer satisfaction.
Investing in migration without building a robust cloud foundation leads to a situation where each next app costs as much (if not more) to migrate than the first one. Creating a strong and effective foundation involves these steps:
- Automate infrastructure processes using infrastructure as code (IaC)
- Build end-to-end application patterns that can be easily used as code
- Use automated continuous integration/continuous delivery (CI/CD) pipelines
- Adopt “policy as code” (PaC) and “security as code” (SaC) approaches
- Automate financial operations and manage application costs in the cloud (FinOps)
- Use a DevSecOps model and hybrid operations across the cloud
Although many financial organizations are only beginning their migration journey, those focusing on architecting a migration plan based on these three shifts are already seeing success in harnessing the significant business value that the cloud provides.
Your cloud adoption journey starts here: Let’s drive it forward!
Cloud adoption in banking and financial services is a huge transformational step forward that more and more financial organizations are looking to embrace. The cloud offers companies the potential to not only move faster and cut IT costs but also innovate with disruptive emerging technologies. However, to claim their share of the trillion-dollar opportunity, industry players must have a clear understanding of the value at stake and prioritize the right business cases.
Banks and financial institutions can use the knowledge and guidance of an experienced financial technology partner to receive support at every step of cloud migration, from planning and readiness to execution and adoption. With the right strategy and approach, any migration challenge can become a manageable process resulting in a successful cloud transformation.
Will you take advantage of the cloud to get your business future-ready and supercharge your organization’s path to digital maturity? The power lies with you!
Intellias helps banks and financial players approach cloud adoption in an effective, secure, and sustainable way. Our cloud-first mindset empowers financial organizations to witness success with their cloud transformation strategy. Contact us to start your cloud adoption journey together!