Cloud adoption in banking accelerates as banks ramp up digital services, new report finds

By Gaia Lamperti

In a new survey of IT executives in the banking sector, more than seven in ten (72%) reported that incorporating the Cloud into their organisation’s products and services will help to achieve business priorities. Just under half (47%) said that it will do so “to a great extent”.

The survey, ‘Capturing value in the Cloud’, was conducted by The Economist Intelligence Unit in partnership with Temenos, found out that banks have generally been slower to take to Cloud computing than other sectors. But the adoption of software as a service (SaaS) and Cloud infrastructure has accelerated since the start of the pandemic, as banks seize an opportunity to cut costs and ramp up their digital transformation projects, with 82% of banking IT executives saying they now have a clear strategy for adopting Cloud.

“The pandemic has clearly lit a fuse under cloud adoption with banks having to deliver and scale digital services rapidly,” Andrew Reeves, Head of Cloud a Temenos, said. “However, Cloud is also a prerequisite for success in the world of open banking and Banking as a Service. These are megatrends, powered and enabled by the Cloud, that are shaping the future of banking.”

According to the report, banks are tapping into the Cloud to speed up their ability to gain insights from data, and in turn to be able to innovate faster. Cost is the biggest driver of Cloud adoption (43%), followed by the adoption of AI (34%) and improving customer experience (21%). Business agility, elasticity and scalability are together cited by 40% of respondents as top drivers.

Commenting on the findings, Kanika Hope, Chief Strategy Officer at Temenos and author of the report, told IBS Intelligence: “The banking industry is moving inexorably towards open banking and new digital ecosystems with embedded finance and banking-as-a-service all gaining traction and driven by open APIs. For any player, success in this new open banking world requires resilient, secure and scalable technology that only a Cloud-based platform can deliver. This includes greater use of public Cloud where the benefits of hyper-scale are greatest.”

Yet barriers stand in the way of a wholehearted embrace of the Cloud, including security, privacy, compliance and governance concerns. These challenges are leading firms to invest in both technology and talent.

“But this is changing in recent years as banks become more familiar with the changes needed to manage the risks and change the culture of the bank,” Hope added. “This is supported by increasing regulatory guidance and with access to new SaaS banking platforms, such as The Temenos Banking Cloud, we are seeing rapid take-up from incumbents and challengers leveraging the cloud for mission-critical core and digital banking services.”

The report findings are in line with established banks’ urge to figure out how to use incumbency to fend off FinTechs and challenger banks, as the newer entrants use the Cloud to advance quickly into new market opportunities. “Covid-19 has had a turbo-charging effect on cloud adoption as banks have needed to ramp up their digital transformation projects – to meet the changing needs of their customers and fend off the threat from new competition,” Hope concluded.