A rapid shift in attitude toward cloud banking is happening within the financial services industry, according to Gartner. A survey by the IT research firm found that cloud computing is the top priority for global financial service CIOs and that 39 percent of those surveyed expect more than half their transactions to be supported via cloud infrastructure and software as a service (SaaS) by 2015.
The survey found that in Europe, the Middle East and Africa (EMEA), 44 percent of financial service CIOs expect more than half all their institutions’ transactions will be supported via cloud infrastructure by 2015, and 33 percent of them expect that the majority of transactions will be processed via SaaS by 2015.
“Early cloud adoption, especially in the FS [financial service] sectors, may have been limited to non-core areas and proofs of concept, but it is set to go mainstream, moving the heart of the business, transaction origination and processing, into the cloud,” said Peter Redshaw, managing vice president at Gartner. “Cloud banking should be innovative, dedicated to this industry and transformative.”
Among the most attractive benefits of cloud banking is being able to deploy (in an economically feasible way) the “champion-challenger” model. This adds a competitive dynamic to the way processes are improved and chosen. As banks progressively replace people in the value chain with algorithmic operations (AOs) to run processes and make decisions, their intellectual property increasingly resides in these algorithms. The value of people is not in running operations but in improving the AOs, the report said.
“Cloud banking has the ability to drive -creative destruction,'” Redshaw added. “As well as helping to improve or optimize an existing service or process, cloud banking can provide the wealth-or the freedom-to try completely new services and processes, such as reverse auctions and third-party core banking systems, maybe even running them in parallel. Successful new cloud services can displace the existing and dominant process for design, distribution or transacting in a disruptive way, rather than just incrementally improving them.”
Although the technology is still immature in many places, cloud is a top priority for banks that need to continue a long-term focus on efficiency and support the CEO’s growth strategy by becoming more flexible and agile to support new business models, new markets, new channels and new products, the report concluded.