5 minute read 19 Mar 2020
How can the cloud be an innovation lever for financial services?

How can the cloud be an innovation lever for financial services?

By

Bart Dumon

EY Belgium Financial Services Technology Consulting Leader

Innovative leader. Passionate about technology and innovation. Focused on client needs and building high performing teams.

5 minute read 19 Mar 2020

Why financial service providers can no longer ignore the opportunities and benefits of cloud applications.

In recent years, cloud technology has become an important driver for companies that wish to innovate and grow. Companies that postpone the move to the cloud risk being left behind. Until now, financial service providers have always by necessity been cautious, but those fears are slowly but surely fading away. What advantages and commercial opportunities does the cloud offer them? And how can financial service providers prepare their organization for the 21st century? Bart Dumon, EY Financial Services Belgium Technology and Innovation Leader, and Thomas Kessler, Head of Customer Success Microsoft, make an analysis.

Increased use of the cloud

At the dawn of the second industrial revolution, many companies had their own power generator. With time, they all joined the public electricity grid. A similar situation currently prevails in the field of IT management. Thanks to far-reaching waves of technological innovation, IT infrastructure, such as data centers, has become a commodity. The trend towards hyperscale cloud applications has definitively started in the financial sector. International forecasts state that 80% of applications and devices will work in the cloud in the coming years.

The trend towards hyperscale cloud applications has definitively started. International forecasts state that 80% of applications and devices will work in the cloud in the coming years.

Why a quick and definitive breakthrough?

While companies initially only (tactically) used the cloud for new applications (such as with the development of innovative AI applications), the cloud environment has gradually grown into an increasingly secure and better (strategic) alternative to their own data centers. Originally, this technology was mainly used to increase IT efficiency and transparency, for example for faster e-mail traffic and data storage.

In addition to improved security, companies can also better manage various internal processes via the cloud, such as offering personalized and innovative customer solutions, improving operational excellence within the organization, increasing the productivity and efficiency of employees and increasing the agility to bring innovation.

If the CIO, together with other board level decision makers in a company, can create a broad support base for cloud applications, this opens great opportunities for IT to gain importance as an internal driver for growth and innovation.

The opportunities in hyperscale cloud

The fundamental breakthrough of the cloud – originally mainly in industries where IT was less sensitive and strategic, and thus mainly driven by savings – is also continuing in sectors that for various reasons held back.
The financial services sector has traditionally been more risk-averse and conservative when it comes to deploying new IT solutions, but in recent years it has realized that hyperscale cloud can offer enormous opportunities:

  • An attractive and agile offer of innovative B2B and B2C financial solutions, in real time and with the deployment of high-performance tools such as API management, Artificial Intelligence or chatbots (infrastructure as a service);
  • Substantial cost savings (whereby the Total Cost of Ownership can be reduced by 20 to 30%) thanks to the shift from expensive and dedicated IT infrastructure to cost-efficient, flexibly deployable cloud software (platform as a service, but also infrastructure as a service and software as a service);
  • A streamlined internal work organization – via Microsoft Teams or the cloud platform Azure, for example – that enables DevOps, offers reusable components in the cloud (platform as a service) and more flexible and lower maintenance effort infrastructure (infrastructure as a service).

The question is no longer whether the cloud is safe, but whether a company uses the cloud safely. A global player such as Microsoft spends more than one billion dollars a year on cyber security.

The importance of cyber security in cloud applications

The market is greatly pressured into becoming more secure, as the number of cyberattacks is on the rise. Hence, cyber security remains an important issue for financial service providers. A possible data breach could cause not only serious operational problems but could also lead to irreparable damage to the reputation of a brand. Hence why boards of directors initially took a very cautious approach to the cloud.

But in the year 2020, this concern is no longer relevant. The market increasingly views the cloud as more secure than on-premise infrastructure. Even the NBB, which is the prudential control authority on topics like IT, is supportive of moving to the cloud if the approach has been properly documented and approved. So, the question is no longer whether the cloud is safe, but whether a company uses the cloud safely. A global player such as Microsoft spends more than one billion dollars a year on cyber security, which is only possible thanks to synergies and scale from thousands of companies that join forces via the cloud platform. No single company can release such security budgets.

In order to analyze this topic in depth, EY recently conducted an extensive market survey on cloud adoption. Where do companies see significant benefits?

Cloud applications allow companies to create a streamlined(er) internal work organization, allowing employees to collaborate more easily and efficiently and to spend extra time servicing customers and suppliers.

Results from EY’s survey

How do respondents rate the benefits of the cloud (mentioned above)? Customers cited the following elements as key cloud benefits: agility and responsiveness to changing market conditions (88%), cost optimization (50%), higher productivity (38%) and scalability (38%).

One advantage that respondents do not cite, but which is gaining in importance, is that the hyperscale public cloud is much more sustainable than the sum of individual data centers. Microsoft's Azure, for example, has a carbon footprint 98% smaller than an average traditional data center. This is an advantage that can give a company a huge boost to its reputation in times of climate awareness and sustainability.

EY and Microsoft: 1 + 1 = 3

As the cloud will gain ground in the coming years, your business needs to be ready for new challenges in its implementation and application. EY Global joins forces with Microsoft in helping financial service providers get started and provide expert advice in areas such as architecture, platform support, security, and data protection. At the same time, this partnership also offers expertise to redesign and adapt business and process processes. And because cloud investments are regarded as innovation, there are tax opportunities in the form of incentives.

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Summary

In recent years, cloud technology has become an important driver for companies that wish to innovate and grow. Companies that postpone the move to the cloud risk being left behind. Until now, financial service providers have always by necessity been cautious, but those fears are slowly but surely fading away.

This is because financial players are increasingly discovering the benefits of cloud applications: agility and responsiveness to changing market conditions, cost optimization, higher productivity, and scalability. By streamlining IT processes, companies gain more time and space for personalized and lower-cost customer solutions, which also deliver added value.

About this article

By

Bart Dumon

EY Belgium Financial Services Technology Consulting Leader

Innovative leader. Passionate about technology and innovation. Focused on client needs and building high performing teams.