Inside the Cloud’s Transformative Impact on Finserv

In this increasingly digital age, cloud computing has transformed the lives of millions of people around the world, whether they realise it or not. 

More specifically, in business circles, the cloud has reshaped the everyday work of the technology function, not to mention wider business operations and how goods and services are delivered. 

Inevitably, the same is true of the financial services sector. Cloud-based capabilities have shaped and are continuing to influence product development, payments infrastructure, customer service, cybersecurity strategies – the list goes on. 

“The biggest and most innovative finserv businesses see cloud and financial service excellence as indivisible,” contends Steve Morgan, Global Banking Industry Lead at Pegasystems. “On-premises systems simply don’t offer the scalability and efficiency needed to deliver banking and insurance services today. 

“Having been cautious about moving frontline applications and data to the cloud, the reverse is true today. Cloud is now the platform on which much of retail banking, and increasingly corporate banking, is run.”

Rory Yates, Chief Strategy Officer at insurtech innovator EIS, is in full agreement. 

“We’re almost at a stage where we could describe the cloud and financial services as synonymous,” he adds. “We’ve seen a shift from, ‘we need to experiment’ to ‘cloud is in our future’. 

“Cloud is a catalyst for enterprise business transformation and has already shown it’s a game-changer for how financial services organisations will operate.”

The foundation for fintech innovation

Cloud computing has arguably been the catalyst for the very existence of leading fintechs and insurtechs. Perhaps big-name brands operating in these spaces would never have been considered, let alone launched, without it.

Steve Williams, Financial Services & Insurance Lead at Orange Business, is unequivocal in his belief that this particular technological advancement bears significant responsibility for ensuring fintechs can rival more established finserv institutions. 

“The cloud is the foundation for much of the innovation that is reshaping the fintech industry for the better,” says Williams.

“Cloud platform providers are enabling fintechs to deploy new services quickly and scale them seamlessly to meet market demand, all while maintaining performance, security and compliance.

“It’s cloud providers that encompass the entire digital services value chain—from cloud-enabled data management and compliance expertise to worldwide scale—that have driven the most innovation in fintech. They allowed fintechs to focus on growth and ultimately gave them the edge over traditional financial services institutions that had legacy IT infrastructure.”

It’s much the same story in the world of insurance. 

Like banks, insurers have faced a host of market, customer and regulatory pressures in recent years, forcing them to rebuild their business models and technology foundations around customers. 

Crucially, the cloud has allowed these firms to adapt at pace and keep up with the rapid rate of change. 

“Scalability, adaptivity in change and extensibility have made cloud strategies fundamental rather than optional or just desirable in insurance,” continues Yates. 

“Cloud technologies provide these businesses with a far greater ability to build, test and deploy seamlessly and easily. Vitally, this allows business change to be more frequent, lower-risk and at a lower relative cost of change.”

A boost for banks

Increased collaboration between banks and fintechs in recent times has pushed the former towards a new era of modernisation.

Traditional institutions have been left with little choice but to do away with outdated IT infrastructure and, inevitably, cloud migration has played a pivotal role in the transition. 

It’s a development that has facilitated far easier integration of fintech solutions, helping banks to provide added value to their customers.

They can also engage with fintech firms on their own terms, as Morgan explains. 

“When a bank has a cloud platform, they can more easily take on board the specific capabilities of a fintech,” he says. 

“Greater cloud migration and development of a cloud-native mindset means the bank can think and behave more like the fintechs with which it wants to collaborate.”

Williams acknowledges that, by embracing, adopting and migrating to the cloud, banks can unlock increased agility, innovation and efficiency, ensuring they remain competitive and provide outstanding customer experiences in what is a rapidly evolving financial landscape. It’s not all smooth sailing, however. The inherent inflexibility of legacy banking platforms makes their integration with modern systems challenging, to say the least. 

This can not only end up hindering innovation but may also lead to expensive maintenance costs and security vulnerabilities. 

“Data sovereignty, security and privacy remain top concerns for banks migrating to the cloud,” Williams goes on. “They’re key factors in the speed at which traditional banking has adopted cloud – and finding the right cloud is of utmost importance. 

“For banks, managing the migration process requires careful planning and expertise to ensure a smooth transition and continued compliance.”

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