Financial Services Firms Get a Cloud to Call Their Own

The first wave of public cloud adoption largely washed over financial institutions. Concerns about security, regulatory compliance and data control in the cloud demanded that banks, brokerages and other money management businesses remain tied to the on-premises data centers that they fully control. As recently as late 2018, 43% of global banks had little or no cloud strategy and 63% had no key performance indicators to measure their progress in moving to the cloud, according to Accenture.¹ By some estimates, less than 20% of financial services workloads are in public cloud today.

But a shifting business climate compounded by a global health crisis has made development of a cloud strategy an essential agenda item for financial executives in 2020. Factors driving this trend include:

• Born-in-the-cloud financial technology companies―which attracted more than $135 billion in investment in 2019²—are becoming both the biggest competitors and most important partners for established financial firms.
• The drive to deliver better and more personalized customer experiences is fueling investment in data-intensive analytics and artificial intelligence applications, which are deployed more easily in the cloud.
• Customers’ growing use of mobile services demands that institutions adopt public cloud to serve them anytime and anywhere.
• The COVID-19 pandemic has underlined the importance of having flexible infrastructure available that can accommodate surges in use and rapid application deployment. The crisis has accelerated what was already a rapid migration to cloud platforms.

It isn’t surprising that PwC asserts that “the public cloud will become the dominant infrastructure model” for financial services beyond 2020.³

But is public cloud ready? One reason financial firms have been slow to adopt IaaS and PaaS is because working with multiple cloud providers can be complex and frustrating. Each has its own policies and procedures in critical areas such as security and compliance, requiring detailed negotiations on a case-by-case basis. Some cloud platform providers require that they maintain control over customers’ encryptions keys, a policy that’s a nonstarter for tightly regulated financial firms.

Data sovereignty policies also vary among providers, raising the possibility that customer data could be stored in locations that are subject to laws and disclosure regulations that are different from those in the financial institution’s country of origin. Widespread confusion also exists over the shared-responsibility security model, which assigns some responsibilities to the infrastructure provider and others to the customer.

Public cloud providers and their customers assume a high degree of mutual trust, but financial services customers don’t have that luxury. Regulations require that they be responsible for protecting customer data on premises, in transit and in the cloud. Not all cloud providers support an end-to-end zero-trust security architecture in which all requests for data access are subject to authentication.

What’s needed is a cloud that financial services companies can call their own. It’s called IBM Cloud for Financial Services™. Built in collaboration with some of the world’s largest financial services firms, including Bank of America and BNP Paribas, IBM’s new public cloud platform offers preventive and compensatory controls designed to help banks comply with stringent industry regulations. It provides multi-architecture support and advanced security using the industry’s highest level of encryption certification and unique “Keep Your Own Key” capabilities that ensure that only the financial institution has access to its data. The cloud also adheres to the IBM Cloud Framework for Financial Services, a set of common operational criteria and streamlined compliance controls designed by financial services customers specifically for their industry.

Financial services firms are ready to move to the cloud. Now the cloud is ready for them.

¹“Accelerate to Cloud – Banking Readiness Report,” Accenture, Nov. 5, 2018
²“Pulse of Fintech H2 2019,” KPMG
³“Financial Services Technology 2020 and Beyond: Embracing Disruption,” PwC