Johannesburg, 11 May 2023
Financial services organisations have always had to balance innovation and growing customer demand with compliance and security, and this is not going to change any time soon. While many other industries have had the luxury of experimenting with emerging technologies, this sector has had to take a far more measured approach – one that is delivering real results.
For many years, so-called traditional financial services providers were perceived to be laggards when it came to the adoption of new and emerging technologies. While it’s certainly true that cloud-native fintech start-ups have made a lot more noise about their technology investments, the reality is that the entire industry has spent the past decade pursuing a comprehensive digital transformation strategy that is delivering impressive results.
From early innovations like instant money transfers and user-friendly banking apps, to today’s common use of AI chatbots and data analytics and much-publicised experimental blockchain implementations, financial services organisations have created a robust technology foundation on which they are building a digital future.
Unsurprisingly, the cloud sits at the heart of all these digital transformation efforts. What is unexpected, however, is the growth of hyperscale investment in such a tightly regulated industry.
Crunching the numbers
According to last year’s Flexera State of the Cloud Report, migrating workloads was the top cloud initiative for financial services organisations in 2022. These migrations were largely to the public cloud, with 78% of financial services organisations reporting already running workloads on AWS, and 76% running workloads on Azure. This, says Flexera, is a clear indication of increasing confidence in the security tools and processes of cloud providers to implement adequate protection.
This trend wasn’t lost on local organisations operating in the sector. The 2022/2023 ITWeb Brainstorm CIO Survey also found that trust in hyperscale public cloud services is growing, with 62% of respondents saying they were using the public cloud this year, compared to only 35% last year.
The concerns around security and data privacy that have historically hindered the move into the public cloud are still there, albeit to a lesser extent. However, financial services organisations have started to appreciate the fact that the sheer size of the hyperscalers allows them to be better equipped to deal with security- or privacy-related issues than they could achieve on their own without having to invest millions.
With the surge in cyber attacks we’ve seen in recent years, financial institutions are taking no chances, which is why hybrid and multicloud strategies have become the norm. Securing data and systems remains a top priority for CISOs this year, even though they are spending less time on security and governance. Using multiple clouds allows them to access best-in-class capabilities, performance and security, freeing them up to focus more on the legacy systems and applications that need to remain within existing on-premises infrastructure.
Working smarter, not harder
One of the primary drivers of the move to the cloud for financial services organisations is the sheer volume of data they deal with on a daily basis. Over and above the cost-saving implications, these companies are starting to use the cloud to speed up delivery. Data warehouses and data marketplaces no longer have to be managed by an entire in-house team and hundreds of billions of records can be processed in a very short space of time.
This not only allows companies to access critical information fast for operational purposes, it creates the environment necessary for innovation and improved customer service. Some financial services organisations are leveraging this benefit of the cloud through their artificial intelligence (AI) implementations. AI is being used to power recommendation engines and chatbots, as well as for fraud analysis and prevention.
According to the latest State of AI in Financial Services report from NVIDIA, 31% of financial services organisations are investing in AI fraud detection for transactions and payments, compared to 10% in 2021. Investment into conversational AI also went up by 20% over the past year. As companies continue to see the benefits offered by an effective cloud strategy, further investment into technologies like AI will be inevitable.
Building trust for the future
With even the most conservative financial services providers starting to invest in the cloud, it has become increasingly important for organisations to partner with a proven, trusted CSP that can help them quickly adopt new technologies while meeting security and privacy requirements. Migrating workloads to the cloud is only the first step in creating a competitive edge, and as companies start exploring innovative new business services and practices, a partner that positions them to take advantage of all the opportunities offered by the cloud is essential to success.
In much the same way that financial organisations expect their customers to trust them to keep their money safe, these companies must trust their cloud provider’s architecture and services. The hyperscalers have the infrastructure, but there is no substitute for a local partner that can provide the skills needed to support a company at each new step in their digital transformation journey.
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This article was first published in the ITWeb Brainstorm CIO Survey 2022/2023 report, sponsored by MTN Business.