Financial institutions have been slow to adopt cloud technologies, mostly because of worries about security, compliance with rules, and management. Because of this, they have had problems with their business models, like using old technology, having high operating costs, and not being able to grow.
Cloud computing is becoming more common, and analysts think that by 2022, about 75% of the infrastructure and data of financial institutions will be processed in the cloud.
In this paper, we will look at the current needs of the Banking, Capital Markets, and Insurance industries and how moving to the cloud helps them build the foundation for digital transformation.
The changing ideas and needs of financial institutions:
Banking
Banks have changed their business models to be more focused on digital things. They have to do this because “digital-only” banks are entering their market and offering customers digital banking tools like mortgage calculators.
Customers usually go to the megabanks to get different bank accounts that give them options in areas like overdraft fees. This is no longer true since digital-only banks now offer checking accounts and overdraft fees that are competitive. Megabanks are having to change the way they do business to keep up.
Before, business models were based on customers’ looking at how many branches a bank had and where they were. As we can see now, branch location is not a big deal at any income level.
Due to the rise of digital banking and new ideas, banks need to offer services to their customers at a low cost per unit without affecting their operational efficiency. It is very important to have flexible and instant data platforms and technology.
Capital Markets
The capital markets industry has been held back for a long time by the high costs of investing in technology. A common use case has been buying and selling trades that can increase or decrease quickly during peak hours. In the past, the collection of trade data and the need for real-time analytics meant expensive technologies had to be set up in data centers.
These technologies provided permanent, extensive processing power, even though they were only needed during peak hours. During these peak times, large IT teams need to be ready in case there is a problem and the platform needs to be up and running.
Insurance
Let’s look at the Property and Casualty (P&C) Insurance industry as an example. In the past, customers dealt with claims management. It is by calling call centers (a single channel) and filling out paper forms sent by mail or email.
The claims process has been known to take a few weeks and involve a lot of phone calls, which is bad for the customers. The Claims Journal says that the P&C insurance industry has the fewest positive experiences with claims service out of all insurance lines of business.
Yet, it is the most important thing that keeps customers coming back. Millennials use multiple channels to communicate. Enabling an omnichannel approach has become the standard way to give customers a seamless experience that keeps them coming back.
Financial institutions are having trouble with expensive legacy platforms, the rise of digital/omnichannel demands, and the need to process huge amounts of data in real-time. All of this is happening at a time when they want to spend less on IT so they can focus on giving their customers value.
The cloud is a step toward digital transformation.
Financial institutions are working harder to change in the age of Industry 4.0 and digital disruption. Businesspeople seek opportunities and modify their business models based on the massive amount of data from numerous sources to become an Intelligent Financial Hub. The cloud ecosystem gives financial institutions the keys to manage and mine huge amounts of data about their users’ billions of transactions.
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