Technology and infrastructure in the financial services industry have long been seen as one of the main operational issues holding back businesses. If they were struggling with growth, customer satisfaction, or compliance, there’s a good chance that technology contributed to the issues they faced.
In the past, financial institutions have been criticized for being slow in technological adoption and entering the cloud age, but given the issues many have faced with legacy IT systems, this may not be. a huge surprise. Technology was often seen as a cost center whose problems were too big to solve, and would swallow all the resources directed at it without seeing much in terms of meaningful change.
However, these views are very much of the past, many now realize that the cloud will have an important role to play in pulling them out of the pain of their old tech stacks, and CIOs are now much less risk averse. and the investment they once were.
Just three or four years ago, many CIOs in financial services companies weren’t interested in cloud technology. The perceived complexity of migrating workloads from on-premises infrastructure or privacy concerns were among the reasons cited for the restraint. However, these arguments carry very little weight today.
In a discussion forum we recently hosted for our clients, attended by many of the world’s leading financial institutions, this shift in mindset was very apparent. In fact, cloud technology was high on the priority list of key decision makers. According to a recent Fenergo survey of global banks and asset management companies, nearly two-thirds (56%) of senior decision-makers said investing in cloud technology is a top priority. This should be seen as an encouraging sign, as it will be critical to providing valuable services to customers, running an efficient business, and meeting regulatory obligations for the foreseeable future.
Critical need for a cloud strategy
The conversations at this event made it clear to me that changing attitudes towards data privacy, the relative strength of different architectures, the response to the rise of digital banking and developments in the Artificial intelligence (AI) and machine learning (ML) will be a priority for CIOs in financial institutions today.
Our discussions with these IT leaders mainly focused on the critical need for a cloud strategy in the financial industry and how some of their concerns could be assuaged. Digital transformation and cloud migration has long been an industry chilling topic for quite some time, now we’re seeing those conversations translate into real action. In fact, in the last year alone, more than a quarter of our major customers have switched to cloud-based Customer Lifecycle Management (CLM) solutions and almost all new contracts are for deployments based on it. the cloud. This is in stark contrast to 2019, when only a small minority of our financial institution clientele switched to cloud-based CLM.
These changes are undoubtedly the result of a better understanding of the features and benefits of the cloud and greater confidence in its security – and this has led to a surge in adoption. With earlier concerns about data privacy and data identity management being all but eliminated, we are starting to see a real shift in the way financial institutions are using technology to meet the needs of the day, but the concerns are diminishing. are not the only driving force for change here.
The rise of digitally-driven banks, as well as changing customer expectations and digital appetites in recent years have also influenced decision-making.
Some might say that established financial institutions are just catching up and trying to respond to current market dynamics, especially when it comes to cloud and digital investments. However, I would say that the reason they are making these changes is largely irrelevant. The fact that they are is what matters, and if different parts of the industry are pushing each other to go further and further in solving some of the key issues in their business – better partners and better customers. served therefore – then this can only be considered positive.
The best way forward
What’s also good are the specific cloud-based systems and solutions they are embracing. It’s not just about a lift and change with less sensitive workloads moving from on-premises environments to the public cloud, we’re starting to see the cloud really permeating the technology stacks of financial institutions – from the front office. with the customer experience, to the regulatory compliance technology used to onboard customers, perform due diligence checks and detect red flags indicating potential financial crime.
The kind of IT transformations we’re talking about don’t happen overnight, and CIOs in any large organization, including those in the financial services industry, will have many competing priorities to assess. It must also be said that this dilemma is often exacerbated by a lack of budget and resources to deal with them all in parallel. For the CIO, the best way forward then comes down to the importance of each change as part of a larger transformation strategy: what is the investment required, how long will it take to recover efficiency gains, what growth opportunities does this allow, what risks does it mitigate.
I would say that after laying the groundwork for cloud strategy with a review and re-architecture of the underlying business infrastructure, this regulatory compliance technology like customer lifecycle management solutions should be fairly listed. high on this list. Not only can they significantly mitigate the risk of incurring law enforcement actions and the reputational impact of having substandard processes for anti-money laundering and terrorist financing requirements, but it can eliminate much of the friction that customers can encounter when integrating with more manual processes.
The regulatory environment continues to be very fluid with global task forces and national regulators in key jurisdictions constantly seeking ways to crack down on emerging trends in financial crime and limit the impact of bad practice. And with this ever-changing landscape, manual approaches to compliance simply introduce too much risk (ironically enough for a function intended to reduce it).
Using a system that can be updated to always be in compliance gives risk management teams and, ultimately, management and the board of directors the confidence that they are on top of things. regulatory change and avoid heavy financial penalties from regulators.
To look forward
Today, CIOs look to their technology partners to help them make the right decisions for their organization for the long term, not just their mandate. Transformation plans rarely, if ever, begin and end within the time the CIO is in the role – this is an ongoing process to get things done for the organization – but the efforts of individual leaders must open up. the way to the next without tying their hands and forcing them to take a path that can present problems later.
Technology providers need to know this and play their role accordingly – acting as trusted partners, clearly articulating the merits and potential pitfalls of the options available to them, and working with them to chart the best course. to be continued. And that’s what we try to do every day: help our customers gain a competitive advantage by being at the forefront of innovation.
Today, the majority of the banks we speak to are forward looking. They want to be supported in their digital transformation and cloud adoption journey. Whether they’re just looking to digitize existing processes or harness the power of AI and ML to make smarter decisions and look for patterns of fraudulent behavior, the fact that more conversations are taking place in the world of financial services. on the cloud is encouraging. The fact that these conversations are also going somewhere gives me great confidence that the financial services industry is moving in the right direction and that there are good days to come.
Niall Twomey, Chief Technology Officer, Fenergo