For financial services companies, the public cloud offers many benefits. For example, a recent analysis by the Bank of England estimated that adopting the ready-made services offered by hyperscalers such as Google could reduce technology infrastructure costs by up to 50 percent. Cloud services are also more resilient and efficient — and, as such, less vulnerable to failure.
Moving to the cloud, therefore, is theoretically very good for banking services. But there are some concerns; for example, the concentration of major players that dominate the cloud market — according to tech analysis firm Gartner's latest numbers, the top five cloud providers currently account for 80 percent of the market, with Amazon holding a 41 percent share and Azure representing nearly 20 percent of the market — and, of course, security breaches.
So, what might your institution stand to gain by transitioning to the cloud in addition to saving money? We asked leading analysts and financial institutions for their insight and best practices for adopting cloud services. Here is what they told us.
RELATED: Learn how moving to the cloud can help banks manage regulatory compliance.
Why Banks Transition to Cloud Services
As most financial institutions (FIs) are moving to a digital-first model, where digital is at the heart of their offerings to consumers, cloud data storage increasingly makes good business sense. However, there are more specific advantages too.
“There is a higher demand for data storage and retrieval, and the cloud offers the flexibility of spinning up data stores much faster than on-premises data centers, which traditionally have a longer lead time. Moreover, cloud providers are coming up with cloud-native applications and services to manage data effectively as well as implement cloud-native data governance and security tools to monitor your data loads in the cloud,” says Gaurav Deep Singh Johar, member of the ISACA Emerging Trends Working Group.
Furthermore, data backup and recovery can be done more quickly if a well-designed data redundancy strategy is built up in the cloud.
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What to Shift to the Cloud vs. What to Keep On Premises
What’s clear is that most FIs are embracing some kind of hybrid model, which keeps some data on-premises and some in the cloud. “J.P. Morgan Chase has a hybrid, multicloud strategy, which includes several public cloud providers as well as a private cloud that we built in-house,” confirms a bank spokesperson.
As for what to keep where, “there are multiple factors that financial institutions should explore when considering a move to the cloud,” says Johar. Among them, they should assess the sensitivity of the data that would be hosted in the cloud; whether the apps are internet facing; the ease of scalability to cloud; legacy versus cloud-ready architecture; source code availability; the vendor support available in-cloud; performance and latency factors; data residency requirements; downstream and upstream impact; future supportability in-cloud; and their road map for the application, according to Johar.
What FIs Can Do in the Cloud That They Can’t with Onsite Data Centers
“Our hybrid multicloud strategy has helped us improve the accessibility and scalability of our data, reduce hardware costs, and facilitate automated technological updates so teams can focus on innovating rather than manual deployment of system updates,” says the spokesperson for J.P. Morgan.
“With cloud offerings, you are able to spin up virtual desktop-based applications that offer connectivity from anywhere and everywhere. This takes away the constraint of working from the local network and offers more flexibility to employees to operate from remote places, including their mobile devices,” adds Johar.
Aside from high-performance computing, “artificial intelligence and machine learning, data storage and other areas can be different capabilities that help digitally transform previously manual or on-premises processes like cloud security, auditing, cost and usage reporting, compliance scanning, templated services for better customer experience, and document processing services,” says Tracy Woo, a senior analyst with Forrester Research.
MORE FROM BIZTECH: Learn how the speed of the cloud can help banks identify and prevent fraud.
What the Future of Cloud Storage Looks Like for FIs
“Our end goal is to have both public and private cloud adoption on equal footing,” the J.P. Morgan spokesperson says. Forrester’s Woo says that the major issue will be interoperability. “The hyperscalers have had several major outages last year making customers wary of placing all of their data with one vendor. With each outage, the conversation is revisited. Topics like data redundancy, backup and disaster recovery all come up, storing these on alternate clouds, and similarly, storing portions of data or copies of data on different clouds.”
For more about what credit unions need to know about the cloud, click here.
