Editor’s Note: 2021 shook the banking world, as customer demand for digital services and the frequency of cyber threats increased. In 2022, banks are finally ready to address these trends, and they’re turning to cloud technology to do so. Big banking institutions are increasing their investment in cloud tech in order to streamline data processes, improve digital services, and to stay securebut smaller banks can do the same while still retaining their independence. Cloud migration is a process that requires expertise and assistance from a reliable provider, regardless of how large your institution is.
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If there was any doubt America’s biggest financial institutions are ready to embrace and invest in cloud technology this year, it’s gone.
Fleet-footed fintech startups and dominant players like PayPal have been stealing market share from traditional lenders for years. Finally seeing the light, bank CEOs told investors in their earnings calls last month that cloud technology will give them the power to stay agile, competitive, secure and relevant.
It’s a lot of competition, and we intend to win. And sometimes you [have to] spend a few bucks. If we can spend $2 billion more and get to the cloud tomorrow, I would do that in a second, JPMorgan Chase CEO Jamie Dimon told analysts, according to a Motley Fool transcript.
The cloud will play a larger role in legacy banks’ mission to become responsive, digital-first institutions to better meet evolving customer needs. Themes echoed by Goldman Sachs CEO David Solomon in a January call.
In fact, only 4% of financial services and banks that responded for Red Hat’s 2022 Global Tech Outlook said they had no plans to focus on cloud strategy.
The cloud has reached a level of maturity in the market where it’s not only accepted but preferred, said Jason Malo, a Gartner analyst. It’s a solution that’s proven itself out and now they’re asking how do we do more with it.
Financial institutions today see many reasons to migrateor expand migrationto the cloud such as speed, security, fraud mitigation, customer experience and cost savings.
The pandemic made banks recognize that the cloud is a mass enabler of speed and performance across a broad range of activities. Banks are beginning to grasp the potential lost revenue if they don’t adapt, Zac Maufe, managing director for Google Cloud Global Financial Services Solutions, said in a statement.
Initially, banks were slow to make significant moves to the cloud and took the time to test and learn, said Clara Angotti, president and co-founder at Next Pathway, which helps banks and Fortune 1000 companies migrate data to the cloud.
One of Next Pathway’s bank customers spent three years on a proof of concept test, she said.
Many financial institutions are in the early stages of understanding the opportunities.
Discover Financial CEO Roger Hochschild, for instance, told analysts in its earnings call it’s using the cloud for our data and analytics areas where the speed and massive amounts of storage are critically important.
Besides big data, compliance and core banking are the hottest areas for banks, according to Gartner research.
JPMorgan Chase’s Dimon credited the cloud for its power to create real-time perks for customerssuch as a Friday night dinner offer for a customer known to love steakhouses.
Challenges ahead: people
But as strategies evolve, there is a new problem: the talent gap. Only a third of banks are well staffed to support critical cloud capabilities, Gartner research shows.
Unfortunately, most organizations are not confident in their ability to leverage these technologies and do not have the skill sets internally to quickly upgrade capabilities, Angotti said.
Some banks are being proactive by housing, training, and re-skilling employees, said Ryan Shriver, CTO at Richmond, Virginia-based tech consultancy SingleStone.
They can’t just rely on people graduating from college, Shriver said. These are big commitments and organizations need to upskill their employees to work in the cloud. If they don’t, they risk getting left behind.
Cloud of choice
There is avid interest. Google is seeing greater uptake of cloud technology overall, and with existing customers, Maufe said.
Each of the leading cloud providers are seeing traction from financial services clients.
Microsoft EVP and CFO Amy Hood called out its deal with Wells Fargo as she highlighted a 32% year-over-year revenue surge for Microsoft Cloud in the second quarter of FY 22, speaking on its January earnings call.
How banks are handling their migrations varies by institution, with many using multiple cloud platforms and some creating customized solutions.
Goldman Sachs, for example, is pairing with AWS to develop a solution for clients seeking to access data and analyze it with new tools.
Google expanded its partnership with KeyBank in February to operate its primary platforms and applications on its cloud. By 2025, the majority of KeyBank’s products and services will be in the cloud.
There is no doubt, as consumers increasingly interact with finances for everyday activities, such as grocery shopping, travel and healthcare, the data and edge-processing will be in the cloud.