Banking’s Cloud Conundrum — What’s hindering adoption?

By Han Chon

The move to a new era of banking is underway in Singapore. 

In recent years, a confluence of competition and change has forced banks to reconsider their need for business agility, innovation, and resilience, with digitalization as a means against disruption. The rising demand for digital banking services, the emergence of new challenger banks, digitally native and agile fintech, as well as evolving regulatory landscape, has led the banking sector to a crucial inflexion point today. A point whereby banks have to decide to lead or lag in innovation. 

While the pandemic has sent banks scrambling to modernize their legacy infrastructure and operations, actual technology adoption has been slow. Cloud computing, for instance, has long been heralded as key in underpinning banking’s shift to digital, and research forecasts that the industry’s investment in the field is set to grow 16 per cent through 2024. 

Over the years, regulatory bodies have also supported cloud-first mandates — yet only 8 per cent of global banks have actually moved their workloads to the cloud. Research from our fourth annual Enterprise Cloud Index (ECI) report for Financial Services corroborates this, too, indicating that global financial services providers are lagging behind their industry counterparts by an average of 10 per cent, and even as much as 44 per cent behind the education sector.

So, what exactly is hindering banks’ move to the cloud?

Hyperfocus on security

It is no secret that the banking sector is increasingly becoming a primary target for cybercriminals, and the recent spate of cyberattacks in Singapore and Malaysia underscores that. Today, data security and privacy have become absolutely mission-critical for banks.

In fact, ECI research reveals that one of the primary hindrances to cloud adoption is perceptions of security — with 60 per cent of respondents citing intercloud security as the most significant factor influencing their cloud deployments.

Every bank has different requirements for accessibility, performance, security, regulatory compliance, cost, and business continuity. So, it is crucial that banks develop cloud-smart, strategic approaches that meet the unique needs of their organization. This means leveraging the right mix of public and private cloud models, with solutions tailored to specific needs, to drive greater value, innovation, and return on investment on their technology investments. Furthermore, this allows banks to better address their core concerns and policies around security and data governance from a position of strength, and tweak their solutions accordingly. 

Ultimately, security and threat prevention go hand-in-hand. 

Banks must find ways to heighten their security and sensitivity towards potential threats, especially in the current landscape, where cyber threats continue to escalate and evolve. This includes adopting a ‘zero trust’ approach to security design — isolating different environments into micro-segments to contain the spread of potential threats or attacks and creating virtualized resources to enhance the resilience of cloud environments. Banks can also choose to tap on these virtualizations to test out security shortfalls and be better prepared for actual attacks. 
  
Assuring app mobility

Application mobility is another primary consideration for banks. Our study revealed that despite the potential costs and time investment required, 98 percent of financial organizations surveyed have moved one or more applications to a new IT environment over the last 12 months. 

Additionally, data security and compliance are primary considerations for banks when assessing where to run a given workload.

Banks today face a myriad of challenges that require them to ensure agility and mobility across their various workloads. Regardless of whether it is critical security concerns, improving performance, or the need to comply with evolving financial regulations, it is all pointing towards banks’ increasing need for application mobility. 

However, this can be a time and resource-intensive task, which could potentially disincentivize even the strongest IT teams from making the necessary changes — and this is where containerization comes into play. 
Just as individual documents and files can be sorted and organized within folders and ported flexibly on a shared drive, containerization allows banks to ‘package’ their applications and dependencies within containers. This ensures that applications can be moved and run in and out of different types of cloud operating systems, wherever and whenever needed, thereby ensuring app mobility. And financial organizations agree — the vast majority (86 percent) of respondents surveyed believe that containers are important to their organizations now, or will be within 12 months.
 
Striking a delicate balance 

Ultimately, banks need to realize that security and agility are not mutually exclusive considerations. Their increasing need for secure, flexible IT systems will continue to shape their operations and interactions with customers, for better or for worse. 

Banking’s shift to hybrid multi-cloud goes beyond just a mere shift in platforms. The transition lifts banks’ existing services out of traditional, legacy platforms, while improving overall agility, and paving the way for new service capabilities. For instance, cloud-enabled banking services allow banks to scale their agility and innovation and improve on core, foundational banking workloads. In many cases, it even empowers banks to leverage industry solutions such as Infosys Finacle, which provides ready, core banking solutions for digibank services. 

It’s also about value for money. Shifting to hybrid multi-cloud environments enable customers to gain the benefits of cloud transition faster, and make the most of early benefits — such as container microservices, through competitive industry partnerships. These can often be hindered by the need for banks to refractory, or re-architect their applications to suit the cloud environment or train the necessary skill sets and talents, which delay implementation, and as a result, innovation. 
Hybrid multi-cloud solutions help to accelerate the time-to-market for banks, enabling them to gain maximum returns on their cloud much faster than before. Major banks across the region, including Bank BJB Syariah in Indonesia, RBL Bank in India, and one of Malaysia’s leading banks, with operations in Singapore, have already been fast adopters and seen significant returns on their cloud investments. 

Despite these apparent benefits, challenges remain. Two-thirds of survey respondents (65 percent) agreed that while their organizations would benefit from a hybrid cloud, their current IT vendors do not provide the right solutions for building and managing a hybrid environment. In addition, nearly a third of financial companies (30 per cent) said their organizations lacked hybrid cloud skills, and almost a quarter (23 per cent) said they lacked cloud-native development skills, pointing to a greater need for targeted skills training and talent development to support banking’s shift to the cloud. 

However, banks remain confident that their operations will rely heavily on a hybrid multi-cloud future. Many have already announced plans to dramatically shift their services away from legacy data centres and private cloud-only environments, in favour of integrated, hybrid multi-cloud. Specifically, they cited the increasing need to support hybrid work and collaboration, strengthen customer delivery and gain greater access to cloud-native technologies like AI and machine learning as key reasons for the shift. 

With the way our ASEAN financial services landscape is shaping up, the region’s banks should be leveraging the cloud to sharpen their competitive advantage in no time. 

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