Cloud computing in financial services: From hype to reality

According to banking technology reports, banking & financial services industry is expected to spend $26 – $50 billion on cloud services by the end of 2015 accounting for 15%...

Snehal Fulzele 22nd January 2014

According to banking technology reports, banking & financial services industry is expected to spend $26 – $50 billion on cloud services by the end of 2015 accounting for 15% – 28% of the total IT spend by the sector. [Source: 1. Economist 2. American Banker] Clearly cloud services are becoming increasingly popular in the financial services industry. But given the notoriety of the industry for its speed of technology adaption, are these statistics not surprising?

While it is convenient to attribute to this growing adaption rate to technological developments and the cost of infrastructure, there are other critical reasons which are driving the trend. Let us look at these critical driving factors for this uncharacteristic industry trend:

New business models

Growing customer demands, innovators and developments in the SMAC technologies (Social, Mobile, Analytics and Cloud) has led to emergence of new business models such as peer-to-peer lending and crowd-funding, which without technology are very expensive to sustain. All business models, especially new business models must be agile and flexible in order to stay competent and grow. Cloud services empower these new businesses with agility in terms of reduced time to market and flexibility in terms of scalability and addressing specific business model

Growing competition and shifting customer loyalty

 CompetitionThe financial services market is a crowded market and it is becoming increasingly difficult for companies to differentiate themselves. Moreover, customer loyalty in financial services industry has been dropping every year [Source: American Banker Survey]. With such competitive environment to operate, it is imperative that the financial institutions innovate to stay competent and grow.

Cloud allows companies irrespective of their size to accelerate innovation by enabling them to test new products, services and markets with increased speed, lower costs and lower risks while allowing them to scale rapidly when the concept or market is proven to be sustainable.

Growing number of channels

The number of customer touch-points and delivery channels is increasing by the day across all industries and financial services industry is no exception. Moreover, today’s customer is well-informed, social and demands consistent and seamless customer experience across multiple channels. Not only does it become imperative for financial institutions to grant that the customer is in-control, but also to accept the growing number of transactions per customer as a reality. Without the scale, affordability and speed-of-development that cloud offers, it may be practically impossible for any financial institution to survive through the digital revolution.Omnichannel experience

Growing number of new entrants

While regulatory enforcement is becoming stricter across the globe, it is also true that regulators are relaxing the entry barriers for new entrants. The new entrants are looking to keep the capital investments for infrastructure in check, and what better way than looking out for various cloud delivery models such as IaaS (Infrastructure-as-a-service), PaaS (Platform-as-a-Service) and SaaS (Software-as-a-Service). These popular cloud delivery models help in lowering the total cost of ownership with the flexibility to scale per need basis.


So as you we can see, cloud brings a whole new dimension to banking and financial services industry. We are certainly going to see more financial institutions adapt to SMAC technologies in the near future and include them as part of their long term strategies. While some concerns remain debated today such as privacy, data storage locations and misconceived security threats – tomorrow will be a whole new world.



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