By : Andy Brown
October 16, 2018 12:00 PM
There are many technologies with the potential to have a transformative impact on the financial services industry: blockchain, artificial intelligence and cryptocurrencies, to name a few.
One area of innovation that is already making its presence felt is cloud computing. Many financial institutions have taken major strides towards widespread cloud adoption, a strategy that can deliver valuable results.
The growing cloud
Financial services is one of the industries leading the way in deployment of cloud computing, which is testament to the value businesses see in this technology.
According to research by McKinsey, average rates of enterprise cloud adoption are considerably higher among financial institutions than organizations in other sectors.
These firms are therefore well-placed to realize some of the biggest potential benefits of the cloud, such as:
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 underline that any lingering concerns around migrating to the cloud – often related to data privacy and security – are dissipating and businesses are increasingly recognizing the benefits outweigh the drawbacks.
The impact on payments
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. This sort of agility and cost efficiency 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.
To discover additional payments insights, ideas and strategies that make your job easier, visit our new payments portal at https://www.ncr.com/financial-services/payments-transaction-processing/payments-processing-strategy.