Published August 5, 2020
The disruption from the global coronavirus pandemic doesn’t have to be just that—a disruption.
It can also be an opportunity for financial institutions to experiment and test new technologies for a spin and evaluate the benefits. These could include blockchain, artificial intelligence and cryptocurrencies, just to name a few.
One area of innovation already making its presence felt is cloud computing. Many financial institutions have already taken major strides towards widespread cloud adoption because they’re seeing that it can deliver valuable results. In fact, banking is one of the industries leading the way in the cloud deployments.
According to McKinsey, financial institutions have the highest percentage of server images deployed in private or public clouds – close to 100 percent, compared to an average of 19 percent across other industries.
And they’re well-placed to realize some of the biggest potential benefits of the cloud:
Accelerating cloud adoption is a trend that spans regions. North America will generate the most cloud traffic by 2021 (3.6 zettabytes per year), followed by Asia Pacific (2.3 ZB/year) and Western Europe (1.5 ZB/year), according to Cisco.
Cloud traffic growth rates between 2016 and 2021 are expected to be highest in the Middle East and Africa, Central and Eastern Europe, and North America.
These trends emphasize that any lingering concerns around migrating to the cloud – often related to data privacy and security – are dissipating and that businesses are increasingly recognizing the benefits outweigh the drawbacks.
Payments is one of the fastest moving and most demanding spaces in the financial services industry. Consumers are placing greater expectations on their providers and have more choice than ever before, meaning all firms face a risk of losing business if they underperform.
Use of cloud technology could prove to be a key success factor in this environment, largely because of the flexibility it provides.
Financial institutions committed to deploying applications in the cloud can scale up or down as they see fit, responding to fluctuations in demand or trends in the market. It’s an agility and cost efficiency that can't be achieved with legacy payment systems.
Cloud solutions also reduce the need for businesses to run their own data centers, conduct regular hardware and software maintenance, and invest in IT updates.
An increasing number of private firms are recognizing the potential of cloud for payments, as are industry organizations such as SWIFT, which provides global financial messaging services.
SWIFT has deployed a cloud-based tracker as a key element of its global payments initiative, enabling real-time monitoring of cross-border transactions from initiation to confirmation.
Speaking at a recent Sibos conference, Luc Meurant, head of SWIFT's financial crime compliance division, said, "SWIFT pioneered the use of highly secure cloud technology to deliver hosted compliance solutions. Technology is a great enabler of the collaborative, information-sharing, cost-efficient, utility-based approaches that banks are increasingly favoring as their compliance strategies mature."
As the payments business looks forward, there is little doubt cloud will be a vital element of the industry's future. Gartner predicts a corporate 'no-cloud' policy will soon be as rare as a 'no-internet' policy would be today.
Financial institutions must prepare for this future by adopting payment solutions that are not only compatible with cloud, but designed to leverage this technology to realize maximum benefit for the business and its customers.