March 7, 2023
The financial sector represents one of the oldest industries in the world. Archaeological evidence has found examples of insurance dating back to Babylonian merchants around 4,000 BC. While examples of prototypical banks can be found from the ancient world, the longevity of banking and insurance acts as a double-edged sword. Although it fosters trust, it also encourages inertia.
The financial sector often remains hesitant to embrace change. That is, until a certain inflexion point is reached – which certainly appears to be getting closer with regard to public cloud solutions. Significantly, 19 out of the top 20 US banks have already announced public cloud initiatives.
Adoption is varied, however. Looking at insurers, in 2020 51% considered spending their IT budget on cloud transformation – a majority, but only just.
According to EY, 80% of UK banks have moved less than 10% of their business infrastructure to the public cloud. Regional analysis has found that Latin America’s banking sector is most enthusiastic towards cloud technologies, with 82% of IT executives believing it will have some or a great impact compared with 67% in Europe and the Asia-Pacific regions.
But any hesitancy around the public cloud needs to dissipate quickly. This will not only enable organisations to deliver better services to customers; it will also provide advantages in the increasingly competitive financial services market. Before we understand how to overcome this hesitancy around public cloud and how Getronics can make a difference, let us understand and conquer the common myths associated to Public Cloud adoption for businesses in the Banking and Insurance sectors:
Public cloud myths
While the public cloud market is continuing to grow and is expected to be worth $591.8 billion in 2023, according to Gartner, this growth has not prevented misconceptions from taking hold. The following are the most common misconceptions we hear in the market:
1. No governance
One of the biggest myths surrounding public cloud services concerns governance. Does the public cloud really lack the governance that financial services firms need to avoid excessive levels of risk? In actual fact, there are several common governance disciplines accompanying any cloud platform.
Whichever particular aspect of cloud governance you need to prioritise, whether it’s managing costs, operations, or assets, both banks and insurers have already shown that a public cloud is a viable option. National Australia Bank, for example, automated elements of its cloud governance in 2019 to support the migration of hundreds of sensitive and regulated workloads to the cloud.
2. No data security
Financial services firms have a genuine fear surrounding cybersecurity risk – and not without good reason. Insurance firm CNA reportedly paid out $40 million following a ransomware attack in 2021, and there have been countless other examples of firms in the industry being targeted. It once may have largely been true that cloud had a reputation for lacking the robust levels of security that accompany on-premise solutions, but not any longer. As a recent McKinsey report noted, cloud service providers “are developing better-defined written security practices, offering security architecture reviews, and permitting audits and providing the results of audits from trusted third parties against internationally recognised security standards.” Unsurprisingly, this security emphasis is being noticed by financial services firms.
3. Can’t fulfil regulatory compliance
Banks and insurance firms face a constantly shifting regulatory landscape – influenced by fintech developments, market shifts and even geopolitical changes. For banks and insurers, failure to achieve compliance can result in hefty fines. This, coupled with the fact that regulatory compliance violations are among the top three biggest cloud application security challenges for organisations, goes some way to explaining why the public cloud is still viewed as a compliance risk. However, some public cloud providers even supply compliance experts and interactive tools to ensure cloud-related regulatory requirements are met. Far from being a compliance liability, the public cloud is an asset.
4. It puts everything at risk
When organisations are asked about the biggest risks surrounding the public cloud, they generally have no trouble coming up with answers. A recent survey, for example, cited misconfiguration (68%), unauthorised access (58%), insecure interfaces (52%), and hijacking of accounts (50%). For many in the financial services sector, however, these risks can be mitigated.
That’s why there are a growing number of statistics showing financial services taking a more open stance towards the public cloud. In fact, the public cloud can even help manage risk. As Wayne Byres, chairman of APRA, an institution supervising banking and insurance firms, explains, “In 2015, we expressed reservations about the use of the cloud for initiatives with heightened or extreme inherent risk. Much has changed since then: cloud service providers have strengthened their control environments, increased transparency regarding the nature of the controls in place, and improved their customers’ ability to monitor their environments.”
Cast aside your public cloud inhibitions
Despite the public cloud emerging as an increasingly viable option for financial services companies, some barriers remain. The first is cost. Although the capital expenditure for public cloud is low (or non-existent), operational expenditure can build up over time. However, as long as you scrutinise your contract carefully, the public cloud can actually reduce costs significantly. That’s why 61% of organisations plan to optimise their existing use of the cloud for cost savings.
A lack of personnel with the necessary skills is another inhibitor of public cloud adoption – but again this is easily overcome. Lydia Leong, a Gartner distinguished vice-president research analyst, identified five steps to meet the challenge surrounding internal cloud skill gaps. These include support, training, good recruitment, using senior-level contractors and, if necessary, outsourcing expertise. The latter can be “a project-based approach, or a medium-to-long-term managed services approach,” Leong says.
Rising cloud adoption rates among banking and insurance firms suggest that any inhibitors are not as strong as they once were. According to a survey by The Economist Intelligence Unit, 72% of IT executives in the banking sector believe that moving to the cloud will help their organisation achieve its business priorities.
Don’t miss the opportunities around public cloud
The benefits of a public cloud are vast. We have listed the key ones to build some perspective on the nature and relevance of these benefits as these advantages are finally being embraced by many financial services firms globally:
- On-demand scalability
- Reducing Costs
- Increasing speed to market
- Transforming Business Applications
- Transforming User Experience
However, it’s important to understand that the opportunities afforded by the public cloud are only accessible with the right expertise, tools, and business processes – moving to the cloud is not a quick fix.
“Adoption of cloud in insurance has mostly been hampered by a number of factors and perception challenges, but perhaps the greatest issue has ironically been the positive (but not accurate) perception that ‘cloud’ is the answer to business problems,” Chad Hersh, Head of Worldwide Business and Market Development for the Life Insurance Industry at AWS, explained. “Cloud itself isn’t intended to solve business problems on its own, but the tools and solutions that run in the cloud – together with the right changes to business processes – can help with the business and digital transformation journeys.”
At Getronics, we understand both the benefits and the challenges that surround public cloud adoption. In banking and insurance, the movement towards the public cloud is already underway and we focus on helping our customers in the finance sector to build robust strategies and accelerate this journey to unlock new benefits.
We achieve this by leveraging our Cloud Framework that provides a full lifecycle experience and enables businesses to visualise their entire cloud journey that constitutes several phases. Coming up with a full-fledged cloud strategy is not about facilitating a one-time migration, nor is it about throwing more technology at the business challenges faced by companies – it’s about creating a cloud strategy that meets all business objectives. This includes providing a consultative adoption strategy, migration, cloud development, security and compliance solutions, on-going operations, automation through AI / ML tools and a secure by design approach to guarantee robust governance forever.
Get in touch with us today to find out how Getronics’ cloud experts can help you embrace public cloud as part of your business strategy.
