Pulling the trigger: cloud adoption considerations

Several years ago, any proposal to shift the core systems of banking, financial services, and insurance (BFSI) operations to the cloud would’ve been met with staunch opposition from top decision-makers. But as is the norm in finance, the tides have turned once again. Today, the biggest financial institutions have pushed public cloud adoption to the top of their priority list, and BFSI cloud investments are predicted to expand by about 15% in 2022. Though this newfound enthusiasm is refreshing, some uncertainties and doubts still linger and will need to be ironed out.

Questions abound, from the perception of added complexity to the regulatory hurdles that will inevitably emerge when sensitive data is stored in the cloud. Whatever the drawbacks might be, the inherent agility, cost efficiencies and scalability of the cloud may be too good to dismiss, particularly as BFSI operators are increasingly pressured to remain relevant and responsive in an increasingly uncertain economic climate. For those still on the fence, consider the points below when weighing the cost and benefits of cloud migration.

The pros of cloud banking

Perhaps the biggest misconception held by most BFSI operators is that migrations to the cloud come with additional layers of complexity. After all, it’s entirely new infrastructure. But even though initial migration phases may pose some technical challenges, the long-term payoff — in terms of efficiency, security and maintenance — is well worth the hassle.

BFSI operators will experience a notable reduction in organisational complexity when it comes to resource-intensive workloads like email and identity management. For starters, transitioning email hosting and associated applications off-premises and onto an “as a service” cloud provider noticeably reduces the burden of maintenance, budgetary pressures, and provisioning on IT teams. The ability to leverage identity management and user access restriction capabilities on the cloud provider’s end also helps bolster security while reducing OpEx and workloads on the BFSI operator.

Shifting to the cloud can also help BFSI operators better manage security and regulatory risk postures, which are arguably primary concerns. Picking the right cloud service provider (CSP) is essential here — perform due diligence to ensure they can properly comply with local data privacy laws or financial regulations. If your organisation operates or has customers in different countries or regions, ensure your chosen CSP can comply with regional data regulations like GDPR and CCPA or international financial regulations.

With the exception of fintech, most BFSI operators must also consider their slew of legacy applications and code powering most of their operations before shifting to the cloud. Utilising certain infrastructure as a service (IaaS) solutions allows organisations to largely port their legacy systems to the cloud. This approach also opens up a greater number of cloud-based services and offerings to replace legacy systems, which is always advisable to ensure BFSI operators remain resilient, agile and adaptable in the face of change. But the first step is always the decision to leap to the cloud.

The cons of cloud banking

Though they don’t significantly nullify the strong arguments for the cloud, BFSI operators must nonetheless consider and be wary of some the drawbacks of adoption. Shifting the responsibility of infrastructure operations to CSPs also means BFSI operators must work with their terms, which impacts critical risk mitigation capabilities like disaster recovery and data breaches. Every CSP has their own policies when it comes to backups, storage, and data retention — BFSI operators must ensure they understand the extent of these policies and determine if they meet the finance industry’s strict requirements.

When systems are migrated to the cloud, end performance often fails to meet initial expectations or provide satisfactory returns. This tends to be the result of poor planning and inaccurately drafted service-level agreements (SLAs). It can also be the result of a ‘lift-and-shift’ mindset, where code or applications are migrated as-is without considering technical limitations or incompatibility.

Combating both issues requires consistent real-time monitoring, which allows organisations to identify performance or security issues before they snowball into unacceptable risks or degradation of the customer experience. Unfortunately, most CSPs aren’t inclined to share cloud data with their customers without good reason, making cloud monitoring and optimisation difficult without a dedicated network monitoring solution. BFSI operators should consider investing in such solutions at the early stages of cloud adoption if they’re to meet customer expectations of smooth digital services while complying with ever-tighter data security laws and financial regulations.

As with any technological solution, there are two sides to the coin, but the cloud currently offers more benefits than drawbacks to banks and financial institutions. The ability to scale financial operations, improve security and rapidly deploy digital offerings with a couple of clicks — what’s not to love? But BFSI operators would be wise to consider the points above, even as they embrace the cloud to remain relevant, adaptable and secure in today’s increasingly uncertain world.

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