John Barber, Vice President of Infosys Finacle Europe, discusses the three changes banking will see in cloud systems in the year ahead.
In the article, John discusses what types of cloud systems banks will use, the importance of choosing a secure provider, and how AI will enhance the efficiency of these systems.
Just two decades ago, not many financial institutions, barring a few progressive banks, recognised the potential of the cloud. As evolving cloud security regulations and industry standards built trust among financial institutions in the 2010s, they started to explore various cloud models to support customer relationship management (CRM), analytics, and the more innovative and progressive banks, even core banking functions. However, it would take a pandemic to galvanise public cloud adoption among banks and push them to build and deploy cloud-native applications.
Today, under pressure from digital and cloud-native competition, banks seek to derive the full value of cloud transformation as quickly as possible. The Infosys Cloud Radar report noted that banks must migrate at least 60% of their workloads to the cloud to unlock value. Besides scaling migration, we believe that the most successful institutions will also ride the following three trends to recompose banking on the cloud to benefit not just their own organisation but also their customers and partners.
A ubiquitous cloud revolution
This year, we expect cloud systems to become omnipresent, with banks moving towards ubiquitous adoption. Financial institutions will build fit-for-purpose cloud environments for their workloads, services and devices, leveraging several combinations of cloud setups in the form of hybrid, multi, and poly cloud. As the Internet of Things (IoT) expands, it will increase the need for edge computing; the cloud will be indispensable to ensure edge computing transactions and interactions proceed seamlessly, unhindered by latency and bandwidth issues and in compliance with data localisation norms.
In the interest of flexibility and resilience, large banks will likely work with more than one or two providers to expand their cloud environments. Avoiding vendor lock-in would also give them several advantages, such as access to specialised services, optimal pricing models, and tailored solutions, as well as improved cloud operations and usage experience. Lastly, distributing workloads across multiple providers will reduce vulnerability to service outages—a reason even banking regulators encourage multi-cloud adoption.
Keytrade Bank, Belgium’s first online bank and part of Credit Mutuel Arkea, one of France’s largest banking groups, is harnessing the cloud along with other digital technologies for transformative impact. These include processing massive quantities of data (which was impossible earlier) and driving competitive advantage by accelerating product development, shortening time to market, collaborating with its ecosystem, and enhancing personalisation.
Also, consider Union Bank of Philippines’ experience with hybrid cloud systems: the bank said it gave them the flexibility to migrate workloads gradually and scale IT infrastructure only as required.
Also, with a hybrid cloud approach, banks can distribute their workloads based on criticality and sensitivity: they can house voluminous transactions in the public cloud and sensitive data in a private cloud system. The bank also notes that gradually transitioning workloads to a public cloud allows financial institutions to ascertain performance and security, thereby minimising migration risks.
Cloud security becoming paramount
Ensuring that the ubiquitous cloud is secure and resilient will be one of banks’ top operational priorities in 2024. Accordingly, encryption, authentication, and disaster recovery will emerge as pivotal functions within cloud computing services. Traditional perimeter security is insufficient to defend banks against pervasive cybersecurity threats; the answer lies in a zero-trust approach to security and proactive breach anticipation, which would contain the damage in case a bank is attacked. In the interest of cloud resilience, banks will also consider secure access service edge (SASE), a convergence of network and cloud security for integrating and streamlining security protocols.
A revolutionary idea in cloud security is to ‘engineer it in’ rather than add it on; this approach, already implemented by Commerzbank (with Google Cloud), automates cloud security and makes it so seamless that it is practically invisible. Autonomic operations and cloud-native solutions have improved reliability and established trust in the cloud within the bank.
Synergies between artificial intelligence, machine learning and cloud systems
Over the years, AI, ML, and the cloud have created a formidable alliance. In 2024, we expect banks will scale this synergy to new levels. At the heart of this expectation is generative AI, whose convergence with the cloud system will influence the recomposition of banking to drive intelligent automation, predictive analytics, personalised experiences and more.
Offering unlimited computing capacity and an array of tools, the cloud is the essential — and dare we say the only possible — enabler of widespread AI/ML adoption in financial institutions. Banks will leverage pre-trained models and collaborative platforms on the cloud to automate operations and run predictive analytics at scale; among other things, the latter will create a shift from reactive defence to proactive threat intelligence and fraud prevention.
We believe that in 2024, banks will seek to leverage the broader potential of AI technologies poised to bring about a more dynamic and efficient digital environment. Real-time data analysis and incorporating large language models (LLMs) will enrich general intelligence, enabling banks to innovate like never before, enhance operational efficiencies across the board, and offer highly personalised customer experiences at scale, all while creating a safer digital environment. Lastly, generative AI will likely transform cloud return on investment dynamics to propel further adoption.
The cloud trinity: A future roadmap
Once a tentative exploration for financial institutions, the cloud has become an undeniable imperative. As ubiquitous cloud adoption becomes the norm, banks are poised to unlock a future marked by security, resilience, and powerful AI-driven innovation. This journey, however, requires embracing the ‘cloud trinity’: a multifaceted approach encompassing ubiquitous adoption with a focus on security and harnessing the transformative potential of AI and ML.
This cloud trinity presents a roadmap for financial institutions to navigate the exciting yet complex journey of cloud transformation. By embracing this holistic approach, banks can unlock a future brimming with security, innovation, and a fundamentally reshaped banking experience for all stakeholders.
