Cloud Operating System: 6 Megatrends Shaping the Future of Cloud for Financial Services

Did you know that the finance cloud market is anticipated to grow from an estimated USD 26.93 billion in 2024 to around USD 80.30 billion by 2029, exhibiting a notable CAGR of 20.05%[1]?

When we talk about Cloud, there is a common theme I find in conversation with every C-suite executive I speak with. Their ability to execute on four fronts: growth, agility, efficiency, and innovation.

Naturally, the substantial surge in the cloud market is being largely driven by the necessity for digital transformation, leveraging the intrinsic benefits of scalability, flexibility, and expedited time to market, with compliance and risk management serving as essential pillars. However, over time, the proliferation of cloud computing has begun to redefine operational landscapes, signifying more than mere technological progress; it represents a fundamental reconfiguration of how financial institutions operate and deliver services.

Today, I want to explore six key trends highlighting how the financial services industry is only at the beginning of uncovering the vast potential of their cloud computing journey.

1.?????? Unleashing Generative AI: Cloud-Enabled Value Chain Transformation

The generative AI market across financial services, observed in the global cloud artificial intelligence Market, is projected to reach USD 887 Billion by 2032.[2]. This growth is driven by the essential role of cloud infrastructure in endorsing an "AI-first" approach. Our own recent World Cloud Report found that nearly two-in-three financial services firms (62%) have started using artificial intelligence (AI), with a target to utilize it across the full value chain in the next two years.

Cloud platforms offer scalability and processing power necessary for AI tasks, such as natural language processing, anomaly detection, and predictive analytics, leveraging GPU-accelerated resources. Cloud providers give a wide array of AI and machine learning services such as AWS SageMaker, Google Vertex AI, Azure Open AI etc. Such cloud-powered services enable financial institutions to utilize generative AI across various tasks like fraud detection and personalized financial advice.

2.?????? Transforming the Semiconductor Landscape: Cloud Providers' Vertical Integration

The integration of chip manufacturing by major cloud providers like Amazon, Google, and Microsoft signifies a transformative shift in the competitive landscape. This move not only allows them to manage costs and alleviate chip shortages but also opens avenues for embedding their chips into cloud services. Naturally, this disruption will reshape traditional semiconductor markets and foster innovation.

Financial institutions leverage the evolving chip technology, utilizing multi-core processors and GPUs within cloud environments for intricate simulations and data analysis. This facilitates the deployment of advanced risk management models and enhances decision-making processes, with modern chips offering improved energy efficiency and hardware-based security features, thereby making cloud adoption more appealing for resource-intensive financial applications. The advancements in hardware capabilities enable high-fidelity simulations: for example, accelerated data extraction and advancements in artificial intelligence enable the accurate development of digital twin risk models for commercial insurance. This scalability and speed in data processing, coupled with enhanced security, empower financial institutions to make informed decisions and enhance operational efficiency.

3.?????? Harnessing [PF1]?Quantum Supremacy: Redefining Risk Management with Cloud Infrastructure

The quantum computing market is projected to grow significantly at a CAGR of 38.3%. Quantum computing, with its unparalleled computational capabilities, requires immense computational resources and specialized infrastructure. Cloud platforms drive quantum computing adoption in finance by providing access to hardware and simulators, empowering institutions to explore algorithms, and enhancing cybersecurity. Innovations like IBM Q Experience and Google Quantum AI provide accessible platforms for quantum exploration. For instance, IBM's Quantum Computation Centre has made quantum computing accessible in the cloud with 24 quantum systems available remotely. This democratization allows industries to collaborate and innovate on complex problems.

Major institutions like JP Morgan Chase and HSBC are piloting quantum key distribution (QKD) systems to bolster transaction security against quantum threats, as highlighted by the Bank for International Settlements (BIS) and the US National Institute of Standards and Technology (NIST) consultation on quantum-safe cryptographic standards. Financial institutions leveraging cloud-infused quantum capabilities are poised to redefine risk management, transaction security, and data integrity against emerging quantum threats.

4.?????? Embracing Web 3.0: Optimizing Financial Operations Through Cloud Integration

In the financial services’ journey transitioning to Web 3.0, finance market infrastructure is undergoing a transformative evolution, optimizing operations, enhancing trade settlements, liquidity and streamlining asset management through distributed ledger technologies (DLTs). Innovation takes centre stage as financial institutions apply new levers of operational excellence, backed by accessible and reliable solutions that uphold data integrity and regulatory compliance.

Cloud integration is crucial for navigating DeFi (Web 3.0 more broadly) in a decentralized landscape. Be it token operations, building dApps, rolling out enterprise grade blockchain platforms or securing data – all of these would need strong cloud infrastructure layer. Microsoft’s Multiparty computational services, Azure key Vault, Fabric, AKS, Azure Confidential Ledger (TEE) are some of the vital components of provisioning new age finance market infrastructure particularly for capital markets.

5.?????? Leading Decarbonization Efforts: Cloud-Powered Sustainability in Finance

Climate financial data and analytics is another domain I expect to see grow exponentially. Cloud computing is emerging as the central enabler in driving sustainability initiatives within the financial sector. By accelerating the adoption of AI, machine learning, and IoT, cloud technology plays a critical role in facilitating decarbonization efforts. Financial institutions leverage cloud platforms to efficiently collect, analyse, and visualize vast amounts of environmental data, empowering them to make informed decisions to mitigate their carbon footprint.

As a case in point, Microsoft Azure's comprehensive cloud platform offers infrastructure, application, data management, and analytics tools for building modern data estates. With advanced analytics and machine learning algorithms on the cloud, organizations gain actionable insights into carbon emissions, optimizing resource usage and improving energy efficiency.

6.?????? Driving Inclusive Global Economy: Cloud-powered Spacetech Solutions

NASA is pioneering the use of cloud computing aboard the International Space Station (ISS) setting the stage for future space exploration endeavours. In space, where resources are scarce and time is critical, cloud computing offers a crucial tool for quick test results and increased research capacity. Companies like Amazon are deploying cloud computing hardware to the ISS, paving the way for advanced computing capabilities in space. These initiatives aim to enhance data processing, improve safety, and accelerate research in the extraterrestrial environment.

From a financial services perspective, it gives me immense hope to see the potential that this innovation holds for driving inclusivity and expanding market reach. By leveraging space technology and cloud infrastructure, financial institutions can bridge geographical gaps, extend services to remote populations, and enhance risk assessment through weather forecasting and satellite data analysis. This convergence of space tech and financial services underscores the transformative potential of cloud computing in shaping a more interconnected and inclusive financial ecosystem.

Way Forward

Needless to say, cloud providers will have to transform their own business venturing into new territories like chip development, language models and also upgrade the infrastructure to support ultra-high connectivity, new forms of virtualisation and compute clusters.

Cloud computing stands not just as a trend, but as the very foundation upon which future technological advancements will be built. As we look ahead, it becomes increasingly evident that cloud computing is not merely a service but an ‘operating system’ for the digital age.

Its seamless integration into every facet of our lives will pave the way for a future where all software, hardware, and devices converge seamlessly in a unified ecosystem. This vision of the cloud as an operating system heralds a new era of connectivity, efficiency, and innovation.

[1] https://www.mordorintelligence.com/industry-reports/finance-cloud-market

[2] https://www.prnewswire.com/news-releases/cloud-ai-market-size-to-grow-usd-887-billion-by-2032-at-a-cagr-of-35-8--valuates-reports-301969170.html