The Bank of 2030 is going to look very different from today. Banks need to start putting plans in place now to help them plan for this future in the face of changing customer preferences, new technology, and alternative business models. A significant predictor of the landscape in transition? As a priority for the chief information officer, C-suite executives, and board members, cloud computing is coming to the forefront.
Increasingly, the leaders of banking and capital markets understand that cloud is more than technology; it is a destination for banks and other financial services companies to store data and applications and access advanced internet software applications.
Banking is big business in the Middle East, at the start of 2019, there were about 70 listed banks in the region, according to Bloomberg, serving a population of around 51 million people. About 78% of GCC banking customers would switch banks for a better digital experience, and almost two thirds would be comfortable switching to a digital-first bank. IDC is predicting an annual growth rate of 24% for the Middle East & Africa cloud market, which will reach $5 billion by 2022.
Indian Banks are experiencing a colossal change in their banking processes due to the rapid evolution of technology in their vertical. In India, banks of all sizes have recognized the significance of cloud-based banking services and how they can help with their problems. Microsoft is pleased to have been involved in the discussions with the Department of Financial Services under the Ministry of Finance, the Government of India, the Insurance Regulatory and Development Authority of India (IRDAI), and the Reserve Bank of India (RBI) to create awareness of cloud technologies and understand their concerns. A major digital transformation is being pursued by Indian financial institutions. As part of the Indian Government’s recent demonetization mandate in the fall of 2016, by investing in infrastructure growth, banks and other financial institutions across India are gearing up for the future as digital payments are expected to expand by up to 10 times by 2020.
In Pakistan, the State Bank of Pakistan allowed financial institutions to outsource hosting on the cloud to both domestic and international cloud service providers. Now, cloud platforms can be used by financial institutions for non-core activities and business support processes. HR modules, procurement functions, non-production setting, sandboxing, inventory management, supply chain management, office efficiency, customer relationship management tools (WhatsApp, Facebook, etc.), communication tools, security tools, computing and processing services, data analytics, and risk modeling, middleware, and processing services for payments are described as an exhaustive list. Internal controls were also outlined by the central bank, mandating that all outsourcing transactions be made into legally binding service level agreements. The banks’ data has to be encrypted at the database level, storage level, and network transmission. Further, the arrangement should not contain a lock-in clause i.e. banks should be able to transfer their data from one cloud provider to another.
Global market intelligence firm International Data Corporation (IDC) predicted that 80 percent of China’s banks would purchase integrated financial technology (fintech) solutions from the cloud market by 2024. China’s technological sector was reported to have spent about 220.8 billion yuan on the expansion of these methods for 2020 alone. The report further discussed that 20 percent of Chinese bank transactions may be pre-settled through digital platforms by the end of the year. About 40 percent of China’s banks were also predicted to partner with financial technology companies operating in the cloud ecosystem by 2022.
Since most countries use cloud computing in financial institutions, countries in the North American region can’t be behind in this technology. On April 30, 2020, the US Federal Financial Institutions Examination Council (FFIEC), an interagency group of federal and state banking regulators, issued guidance on “Security in a Cloud Computing Environment.”
The FFIEC guidance focuses on security risk management principles and the financial services sector’s use of cloud computing and supplements its publications on outsourcing of Information Technology (IT) services, Outsourcing Technology Services, and Supervising and Supervision of Technology Services Providers, and its cybersecurity resources. A recent Canadian Bankers Association report stated that in the past decade, the six largest Canadian banks spent a combined 90 billion dollars on technology, $14 billion of which was given out in 2018 alone.
Royal Bank of Canada (RBC) and its AI research institute Borealis AI have partnered with Red Hat and NVIDIA on July 23, 2020, to create a new AI computing platform to improve the experience of consumer banking and help keep pace with rapid developments in technology and changing customer preferences.
Today, banks are rethinking and reinventing how they provide customers with their services and handle their internal and external operations. For financial institutions, cloud technology has become a driving force of growth.
Banks are transforming their company at high speed through the use of the cloud as a business asset. This transition, which took place slowly at first, is accelerating and is now targeting main apps and core systems. Experts across the industry often agree that cloud-based applications can only be implemented by leading and reputable providers of cloud applications.
