Banks are increasingly realizing that, to compete effectively in a world of proliferating bank and non-bank competitors, they must become digital leaders. To do so, cloud technologies are an indispensable element in their digital strategies; it is integral, for example, in enabling banks to provide customers the on-demand service they are used to getting from retail and other consumer industries.
Concerns around security have often held banks back from embracing the cloud, and despite some recent security-related setbacks in the marketplace, we see cloud remaining as a robust and critical element of banks’ digital transformation efforts.
While banks recognize the advantages of developing an agile response to needs and developing new applications on cloud data platforms, only one in four has a defined and robust strategy for cloud adoption, according to our research. Banks’ initial cloud focus, according to the report, has traditionally centered around infrastructure-related functions, with disaster recovery and data backup serving as the two most-common functions that banks have moved, or are in the process of moving, to the cloud.
Banks seeking to improve their competitiveness will need to evolve their strategy of how cloud can enable the bank’s digital transformation. The cloud offers a way for banks to quickly develop new applications and add new services, helping fend off challenges from competitors and remain super-relevant to customers. And data-intensive applications such as artificial intelligence (AI) and complex data analytics – both increasingly important to banks -- are typically cloud-based. Banks will need these resources to operate effectively in a digital environment.
To realize cloud benefits sooner – and pave the way to digital leadership – banks should:
- Invest in skills. Build the core cloud-native skills for cloud management, especially in applications and infrastructure. Only 45 percent of our survey respondents said they have mature or advanced skills in managing cloud infrastructure, while just 60 percent say they are mature or advanced in managing cloud applications.
- Transform processes and tools. Develop the capabilities to sustain comprehensive cloud production services at scale. It is important to move from the experimentation stage to real and comprehensive production based on minimum viable products and pilots. And in parallel be evolving the controls in the organization to be appropriate for cloud infrastructure and solutions.
- Engage with customers. The banking customer is evolving and has ever increasing expectations. And the reality is that the customer is not one persona, or segment, but many. Understanding their needs and how banks can engage more seamlessly is a critical input to the cloud based digital strategy.
It will be some time before banks resolve all the issues related to legacy technology and pre-digital business models. In moving toward digital leadership, action is key. Banks seeking to become digital leaders – and to achieve the increases in shareholder value realized by the top tier of digitally sophisticated banks – should accelerate their efforts in this area, with a focus on rapid innovation and the effective use of data. Cloud is a central element in digital leadership and, while banks need to get cloud-related security issues right, they should be strengthening, rather than backing away from, their cloud-based initiatives.
