Financial services

Financial services have their heads in the cloud – Yvonne Dunn

Yvonne Dunn

Challenges identified in 2017, such as issues around data management, effective oversight of cloud providers, and concerns over data location and access, have not entirely disappeared, but barriers to adoption of the cloud have shrunk.

Regulators are clearly more positive about the cloud for financial services, but not without some caveats. Cloud providers have also become more mature. Compliance programs, ongoing political engagement with regulators, and contract positions that meet regulatory requirements are now expected aspects of market-leading cloud service providers.

Having experience in regulatory outsourcing projects and negotiating with suppliers and a deep understanding of the principles behind regulatory rules are important for a smooth process.

IT cloud cover

Public cloud adoption is still relatively new among European insurers, but that is likely to change. One of the main areas of growth for cloud adoption in insurance is in underwriting and pricing, where greater use of artificial intelligence (AI) to make decisions means greater power of treatment is necessary.

There is increasing pressure on financial institutions to bring new services online – this demand has only been exacerbated by the pandemic. Financial services companies are also increasingly called upon to be resilient, withstand shocks such as the pandemic and ensure “always on” availability.

Cloud solutions also enable financial institutions to make strategic use of data as they help break down data silos and allow financial institutions to have a more complete view of the end customer. Operating in the cloud also provides the computing power needed to generate more frequent and accurate insights. Established financial institutions have huge lakes of data, but struggle to use them strategically if data is locked in silos.

We have also seen the emergence of open application programming interfaces (APIs) in Europe and beyond. APIs promote interconnection between banks and third-party solution providers, prompting banks to adjust their underlying architecture to make it more customizable and scalable.

There are several other benefits that financial institutions perceive they can derive from moving to cloud-based solutions, flexibility and scalability being two examples.

Financial institutions use AI and machine learning solutions as part of data processing and generating customer insights. Given the scale of data held by established financial institutions, this type of business can quickly eat up the capacity of an on-premises data center, whereas the cloud offers a more flexible solution.

Cost savings are another factor. Installing and maintaining on-premises IT systems is time-consuming and expensive, while using the cloud reduces the cost of hardware and can shift the billing model to a service-based model, where costs vary depending on the level of use.

As financial institutions seek to move to the cloud to take advantage of the benefits it offers and join challenger companies and “born in the cloud” fintechs that provide increasing competition, there is little room left for financial institutions that do not want to not consider the cloud. adoption at all.

Yvonne Dunn, Partner and Financial Services Technology Specialist at Pinsent Masons