The New Cloud Risk for Financial Services: Resist Adoption at Your Own Peril

It almost feels like ThrowBackThursday to hear major blue-chip companies discuss plans to move to the cloud. That shift began in earnest about 10 years ago and, with the exception of several strategic legacy apps, is all but over now. Even phone service is delivered ‘as-a-Service’ for many companies. What’s not in the cloud at this point? The conversation has shifted from cloud migration to cloud optimization.

And yet the financial services industry – once at the cutting-edge of technology – has been a standout laggard on the cloud. It’s somewhat understandable given the sensitive customer data that financial institutions possess. High profile data breaches in retail and healthcare caused great pain. The financial services industry is notoriously risk averse. As a result ‘cloud’ has been a dirty word in the industry for years.

Now the financial services industry finds itself in a bit of a conundrum. While it has portrayed the cloud as insecure, the majority of its customers are already there. From large corporations down to individuals with saving accounts, the industry’s clientele are now tech savvier than the banks and that rift is starting to widen. The longer financial institutions sit on their hands, the more challenging it will be to catch up.

Where the cloud was seen as a significant risk to banks in 2006, in 2016 not migrating to the cloud is emerging as an even larger risk. This is forcing the industry to make some tough choices.

I have a friend who works for one of the local, more conservative older banks here in the Boston area. For years he insisted his clients did not care about Internet access to their accounts and their Web presence as a bank was pitiful. My insistence that checking balances, paying bills, and depositing checks through your phone would be common fell on deaf ears. They’ve since reluctantly made progress but as a bank they missed the opportunity and I know they’re facing competition from a more tech-savvy upstart in the market.

Fortunately, the cloud is more secure today. Responsibility has shifted to the service providers who are now charged with keeping their service, apps and their customers’ data safe. Plus keeping a consolidated, centralized cloud service secure is easier than protecting multiple apps and data streams strewn across disparate systems within an organization. The case can be made that the cloud, when executed correctly, is safer.

We are seeing many financial institutions finally make real moves toward the cloud. They have an opportunity to leap frog their competitors and emerge with some of the most productive, efficient and secure services. But there are many challenges on the way. It won’t be as easy as signing a contract, then flipping the service on. The banks have massive, highly complex legacy systems that are currently the foundation of their business. Many are exploring ways to take the migration in steps. And that’s why the financial services industry has emerged as the poster child for a hybrid cloud model.

Cloud Adoption Trends in Financial Services: Are You Ready for the Future?

In fact, our analyst Anne Moxie will be hosting a Webinar on that very topic this week entitled Cloud Adoption Trends in Financial Services: Are You Ready for the Future?You can sign up and join by going to https://infa.media/2a9WVu2

The cloud now poses the opposite risk to the financial services industry from 10 years ago. Resisting the move will only create a wider gulf between institutions and their clients. The financial services players that do not adopt the cloud, and do not migrate strategically, could lose their footing to competitors who do embrace the cloud and get it right.