The demands of financial service providers in the security and availability of cloud services are incredibly high. But yet, moving IT services to the cloud promises financial service providers more efficiency, too. Consequently, it does not come as a surprise, that the financial industry is venturing out into the cloud as well following a trend that other sectors have already taken to the next level.
Overall, there has been a growing demand in services from the cloud since 2016 as well as a strong increase in planners and consultants. But what exactly is it that prompts financial service providers to deploy cloud applications? What are the challenges and which role does data security play? For the explorative ⯈study “Communications 4.0 - Communication and Collaboration in the Cloud”
we have interviewed executives and technology managers from the financial services sector.
Cloud as the key element of future performance
“Digitization has been the most radical change in the working environment since the industrial revolution”, said Microsoft in a statement three years ago. Today, there is hardly anyone who would question this. This change is driven by trend-setting technologies such as artificial intelligence, by shifting expectations of employees, and by an increasingly complex working environment.
The cloud becomes a business enabler
Financial service providers today are facing growing competition and cost pressure due to FinTechs and InsurTechs. Therefore, they must offer their customers a sophisticated user experience while simultaneously streamlining their processes. This evolution along with the increasing pressure due to legal regulations and data protection and data security aspects prompts executives and IT managers in the financial services industry to reassess and modify the technological approach of their companies.
Efficient information technologies, especially IT services from the cloud, are considered a key element of future performance. Financial service providers are beginning to see the cloud as a business enabler as a high-performance cloud platform allows them to work much more efficiently and market innovations faster.
Costs and innovative pressure as driving factors
The cloud offers the possibility of networked collaboration – from anywhere, at any time – without taking a toll on functionality or information exchange. To be able to deal with more and more topics in different teams at distributed locations working with different end devices virtual workrooms are becoming an indispensable asset for everyday work processes. Having access to your data and documents anytime and anywhere is becoming the standard.
Relief of internal resources and cost reduction are further reasons why financial service providers opt for cloud solutions. In addition, innovative pressure and the swift technological evolution promote the introduction of cloud software. Many services are available exclusively from the cloud. On top of that, the complexity of on-premise solutions does not decrease either. As a result, the financial services industry is now also striving to move towards cloud services.
Apart from the many advantages, safety concerns have also been expressed in the study: For non-users, the major reason for not deploying cloud solutions is the concern for data security. And perceived ambiguity about the legal situation create insecurity.
Fulfilling compliance requirements
The legal framework is changing. New and revised regulations in the financial industry have a significant impact on corporate and customer communications. Established financial service providers must be able to flexibly adapt their business models, organization structures, and technology infrastructures.
The latest version of the Markets in Financial Instruments Directive MiFID II has tightened the situation for financial service providers. The legislator prescribes the comprehensive and evidence-proof documentation and archiving of all consultant calls regarding financial and investment advice that may lead to a transaction. Therefore, a solution for legally compliant recording as well as tamper-proof documentation and storage of consultant calls across all communication channels is a must.
During everyday work, it is not always easy to distinguish whether the call must be recorded or not. In addition, companies require a large amount of storage capacity and computing power. Due to new communication channels like video calls and chat, the demand is growing exponentially with ever-increasing data volumes, so that it is no surprise that companies that organize their IT exclusively internally are bound to reach their limits of feasibility.
And there is the problem that many on-premise solutions in the financial sector have evolved over decades and modifications would involve massive costs. This is where the cloud can help to provide solutions flexibly, inexpensively and quickly. The decisive advantage is that today no one has to invest in solutions anymore that might become redundant in five years.
More options to do justice to data security
Especially in financial services, guaranteeing data security is equally important as meeting compliance regulations. Saving and transferring confidential content is extremely sensitive. Cloud providers should thus be examined closely when it comes to security mechanisms, data transport, data storage, data administration, and data storage locations.
For some companies, this uncertainty of what happens to the data is the main reason why they continue to shy away from the cloud. Therefore, it is absolutely imperative that ⯈cloud service providers
meet these requirements and be transparent and clear about what they offer if they want to be able to stand a chance in winning new customers.
Today, there is a wide range of standards regulating specifications in terms of security, data protection and legal provisions. Only if the ⯈cloud service provider
fulfills these standards, can customers be sure that their data is processed and archived correctly and in accordance with the regulations. The bottom line is that in many cases, a well-engineered cloud architecture offers more options to do justice to data security and data protection than an on-premise solution. ⯈cloud service providers
usually have extensive experience with directives and regulatory requirements and are in a lively exchange with regulators around the world. As a consequence, security and data protection are usually much more at the center of attention for ⯈cloud service providers
than in many non-specialized internal corporate IT departments.
Advantages outweigh risks
More and more companies from the financial services industry are gradually becoming aware that the advantages of cloud computing outweigh the risks.
The advantages regarding functionality and information exchange are obvious. Cost reductions are also a substantial criterion for financial service providers in the DACH region hoping to keep pace with international competitors in the medium to long term.
And eventually, the cloud promises to be an apt solution for many security and legal requirements that the financial industry is facing. After all, leaving the operation of comprehensive security, governance and compliance programs to specialized cloud experts often poses less of a risk than having to look for all those experts in the job market and then to train and manage them.
About the study
In the explorative study “Communication 4.0 – Communication & Collaboration in the cloud“ carried out by ASC Technologies AG, experts from Germany, Austria, and Switzerland share their attitude towards the usage of cloud services – with special regard to the atmosphere of growing requirements and the rapid developments in the IT industry. The executives and technology managers from the financial services industry, contact centers, and public-safety organizations have answered our questions in in-depth interviews.
Author: Gerald Kromer
Gerald Kromer is CEO of ASC Technologies AG and consistently drives the expansion of the cloud business. He has already gained cloud experience in his previous position as CEO of NFON and while building OpenScape cloud services for Unify.