Reducing costs remains the most commonly cited driver for cloud technology adoption by banks, with nearly three-quarters believing that moving to the cloud is critical to achieve their business priorities.
In a report by the Economist Intelligence Unit for Temenos, costs were cited as a driver for cloud adoption by 43% of bank respondents globally, compared with just 21% that said improving customer services was a key reason for taking up cloud. It also found that 82% of banking IT executives now have a clear strategy for adopting cloud.
The Covid-19 pandemic has spurred action in cloud adoption by the banking sector, according to the report. “Banks have generally been slower to take to cloud computing than other sectors,” it said, “but the adoption of software as a service and cloud infrastructure has accelerated since the start of the pandemic as banks seize an opportunity to cut costs and ramp up their digital transformation projects.”
Traditional banks are taking to the cloud to enable them to keep pace with digital developments in the sector, while being pressured by cloud-native competitors. Meanwhile, newer banks are using the cloud to reach new markets.
According to the report, banks are tapping into the cloud to speed up their ability to gain insights from data, and to be able to innovate more quickly. Yet barriers stand in the way of a cloud adoption, including security, privacy, compliance and governance concerns.
Andrew Reeves, head of cloud at Temenos, said Covid-19 disruption, when in-person banking and shopping was restricted, forced banks to use the cloud to underpin digital services. “The pandemic has clearly lit a fuse under cloud adoption, with banks having to deliver and scale digital services rapidly,” he said.
But the EIU report highlighted some major challenges. Concerns over the security, privacy and compliance of data stored by third-party providers still persist, with 60% of banks citing this as the greatest risk posed by cloud adoption.
“You have challenges with the cloud including its limitations and challenges with respect to data privacy and security,” said Jimmy Ng, CIO at DBS Bank in Singapore. “It all comes down to what you should be putting in the cloud because of the challenges of data security.”
Other risks cited in the survey as associated with cloud adoption were uncertainties around how cloud infrastructure is or will be regulated and governed (44%), the legal liability and compliance of data stored by third-party providers (41%) and the interoperability of data or services in multicloud adoption (38%).
The benefits of the cloud are huge and many of the world’s biggest banks are making major cloud commitments. For example JP Morgan Chase is replacing its core banking system with a Google-inspired cloud platform from Thought Machine. The supplier, set up by former Google techies, also supplies Lloyds Banking Group, Atom Bank, Standard Chartered and Sweden’s SEB.
Read more about banks moving to the cloud
- Lloyds Banking Group continues its digital journey by investing in a cloud-based payments service.
- Cloud computing is no longer a thing of the future for banks that want to remain competitive.
- Financial stability report by Bank of England’s Financial Policy Committee raises red flag about banks’ growing reliance on cloud service providers.