Cloud for Financial Services Industry
Financial cloud services is an evermore popular topic these days, especially with the rising necessity of remote work options. Financial services organizations are moving to the cloud for a competitive advantage, advanced security and the potential for innovation. The global finance cloud market was valued at more than $15 billion in 2018 and is expected to reach about $55 billion by 2024, according to report by Mordor Intelligence.
One of the driving factors in cloud finance is operational efficiency. Moreover, by using the cloud, companies are able to offer end-to-end loan processing in record time, surpassing finance industry benchmarks.
Finance and asset management is undergoing a radical transformation. Four out of five organizations that participated in a Bizagi report say that providing a better customer experience that can respond to customer needs enables competitive advantage.
Companies continue to explore the cloud for financial services and its benefits. Additionally, cloud software provides companies the ability to focus on revenue and wealth management, while maintaining customer relations.
CSPs arose as a leaders in the digital transformation of various industries. These industries like retail and distribution represent sectors with medium to low regulatory oversight. This reduces some of the complexities associated with implementation.
However, adopting the cloud for highly regulated industries like banks, insurance and healthcare companies did not follow this trend. CSPs lacked the maturity to meet financial organizations’ regulatory and compliance requirements. But this has changed in recent years, with cloud adoption increasing within the industry according to a Gartner study.
Both the banking and insurance industries are adopting cloud services. The study also states that by 2020, 36 percent of institutions will use the cloud to support more than half of their transactional systems of record.
Regulations and Standards
The entry way to the cloud does have its challenges and it’s important to understand the full picture. Those who work in an industry as heavily regulated as that of financial services don’t need reminders of their importance. There’s an expectation that Financial services organizations protect sensitive data and are subject to strict data security requirements. Data protection, business continuity, data privacy are considered when outsourcing their infrastructure over to a cloud service provider.
Financial services are among the most regulated industries with regards to data privacy and security. There’s a long list of regulations that include: PCI, DSS, GLBA, GDPR, Dodd-Frank, FFIEC, SOX and the USA Patriot Act.
Reluctance to Adopt the Cloud
With 71 percent of financial service businesses agreeing that digital transformation needs to happen fast in order to prevent commercial failure, what problems stop these companies from committing to the cloud?
In a survey released in March 2015, the majority of participants cited data security as their primary concern, with application development and testing being their primary desire of utilizing the cloud.
Reasons to Adopt the Financial Cloud
Despite those concerns, the reality is financial cloud security is actually an upgrade, and actually deter or remove any potential risks to data. A cloud provider uses top grade security features and a team of highly skilled systems engineers that monitor suspicious activity around-the-clock. Cloud service providers (CSP) , like our IT Support for Financial firms also implement automated backups every day to reduce risk of data loss in case of a breach. The cloud is better than traditional systems with security. Using pattern matching technology to recognize anomalies when they appear, cloud providers prevent risks rather than create it.
CSPs are extremely secure and have redundancies in place. Regardless, it’s up to each financial institution to understand what they are buying from a CSP, the type of risks associated with the service provided, and the regulatory requirements. For example, depending on the importance of a FI’s service and the sensitivity of their data, the FI can choose the level of encryption. Passwords and encryption keys can be managed in various ways; some CSPs, like Nerds Support, offer additional services like “security as a service.”
Some CSP’s, like Nerds Support, take the added step of achieving compliance with HIPAA and PCI DSS regulations. In doing so they show the capacity to meet stringent security requirements, enabling customers to leverage security capabilities to meet these compliance requirements.
A Customized Cloud
Financial institution need to assess all the risks involved in their processes. Some of those tasks cannot be outsourced. That’s why the financial organization goes through a strict evaluation and assessment of the provider to ensure the quality of service is guaranteed as promised when choosing a provider.
The greatest risk for any organization, however, is not being ready to implement a digital transformation. Larger organizations face internal resistance. There is a resistance to change that plagues both large and small companies.
As more and more companies adopt cloud solutions, however, those in the financial services industry are looking to implement the cloud themselves to keep up. The need to incorporate on demand, easy-to-use services to meet ever changing customer expectation.
The skepticism by financial institutions is understandable. However, they were using Amazon Web Services which is a public cloud provider. There are CSP’s that cater to mid-market businesses and offer personalized services to their partners in the financial services industry. These types of services are more characteristic of private or hybrid clouds.
For example, CSP systems engineers at Nerds Support take the time to evaluate their partners’ current IT infrastructure through an extensive consultation process, rather than pushing a one-size-fits-all cloud service.
Things to Consider
The point here is that CSP’s are not all the same. They vary in the services they provide and how the go about implementing the cloud itself.
When adopting a cloud strategy, financial services decision makers should watch out for:
• Cloud providers that are unwilling to use compliance and up-to-date security to improve and personalize their service.
• Cloud providers that lack the financial services expertise necessary to maintain compliance and regulation standards.
• Make sure that your cloud contract states you keep ownership over all your data.
Customer Support is Important
In the early years of cloud computing, customer support was a huge issue for users. Users plagued by poor response times, inexperienced technicians and overall poor customer experience. Since then, CSP’s have taken great strides in improving support. Cloud technology has been around long enough to better implement through industries that benefit.
If you need a rapid response to client issues, make sure that your cloud services provider has options available for technical support. These options should include phone consultations, email and user training.
The reason to emphasize this point is because a CSP partnership is one that works best when it’s long term. Choosing a cloud provider that dissatisfies means going through the grueling process of migrating from one account partner to another. The problem is, many of these applications don’t easily transfer to other systems.
What are you waiting for?
It’s time for the financial services industry to leverage financial cloud to improve productivity, security and service. The opportunities and capabilities are there. For more information on financial cloud services, call us at (305) 551-2009 or contact us with the button below.