Digital transformation, cloud computing, and COVID-19

By Theodora Lau and Bradley Leimer of Unconventional Ventures 

If there is a silver lining to the global pandemic, it is that organizations worldwide are forced to embark on — or accelerate — their digital transformation journeys. This is especially true within financial services, where nothing is constant, especially in regards to the technologies empowering it. 

After the Great Recession, we saw the combination of consumer behavior, technology, capital and business conditions give rise to new forms of competition. This became a growing force as fintech firms entered nearly every sector of banking. And now this pandemic, which has further accelerated both the need and urgency of digital transformation efforts, including the growing need for extended remote collaboration tools, secure data services, applications, and processing power delivered through the cloud. 

But how many organizations were truly ready for this, despite extensive contingency planning? 

The impact of the COVID-19 global pandemic has forced many of us to adapt and reinvent how we conduct business in virtual environments. Much like building the plane while flying it, the pandemic has quickly accelerated digital transformation efforts worldwide as we collectively grapple with the need for flexibility and agility, as well as the changing habits of our customers. 

The shift to cloud computing, which had already been well underway prior to this health crisis, will continue to play a crucial role as organizations begin to look for ways to increase resilience and move toward a more flexible and scalable infrastructure while gaining economic efficiencies. IDC forecasted $69.2 billion in cloud IT infrastructure spending for 2020, a 3.6% predicted annual increase over 2019. In particular, IDC indicated that “cloud adoption has reached critical mass in Asia/Pacific, with 65% of FSI organization’s workloads reported to be in private and/or public cloud environments.” Hybrid multi-cloud strategy seems to be fast becoming the new normal for many financial institutions in the region. 

When you consider additional services enabled through cloud computing partnerships — artificial intelligence, analytics, IoT, edge computing, secure remote working and collaboration tools among them — the total market is even greater. In November 2019, Gartner projected total worldwide cloud service revenue to be US$354.6 billion by 2022 across BPaaS (business process as a service), IaaS (infrastructure as a service), PaaS (platform as a service), and SaaS (software as a service). Clearly, for technology firms developing cloud service ecosystems, and for the financial services clients (and other verticals) they serve, much is at stake. 

Cloud services innovation and financial services 

For regulated industries such as financial services, migrating sensitive operations and critical applications to the public (or other variants of the) cloud must be done with regulatory compliance, data security and privacy, and network resiliency as utmost priorities. The sensitive nature of financial data, the need for strict controls, and the risk of a security breach in regard to public reputations often gives pause to banks who otherwise might be thinking about entering into or expanding their cloud services technology strategy. This is why choosing the right partner can be the most important consideration for the institutions leveraging this technology. 

In choosing a cloud services partner, financial institutions must also look at the broader technology ecosystem they are becoming part of. In today’s financial services landscape, where incumbent banks are increasingly competing with not only fintechs but big techs, not innovating is simply not an option. Managing terabytes and petabytes of data takes effort and computational power. Instead of spending time managing on-prem infrastructure, resources can be better spent in analyzing and gaining insights from the data, to allow organizations to react quickly. This is particularly important (especially for global banks) under current circumstances where ability to adapt is paramount. 

The distributed nature of cloud computing enables workloads to be spread more globally, thus mitigating the potential impact of one physical location (e.g. building) or a broader location suffering disruption. As we have witnessed the geographical surges in digital traffic during COVID-19, such architecture can not only prove to be more resilient, it can often mean the difference in meeting the needs of your customers quickly. During the initial weeks of the pandemic, customer queries led to dramatic increases in customer support infrastructure demand, as teams fielded queries regarding everything from consumer loan relief to the ways small businesses could obtain credit through programs like the U.S.’s Paycheck Protection Program (PPP) and the U.K.’s Bounce Back loan guarantee. Having more technology services in the public cloud allows banks and credit unions to more quickly pivot to meet changing conditions and changing customer needs. This is why choosing the right partner is critical. 

Flexible solutions for an uncertain future 

Several global banks have already embarked on their cloud journey, including BNP Paribas, Lloyds, Royal Bank of Scotland, Truist, and Westpac. And late last year, Bank of America and IBM announced their collaborative efforts in building the first public cloud specifically designed to address the requirements of financial services institutions. To help develop the control and security requirements for the platform, IBM and Promontory Financial Group, an IBM business unit and a global leader in financial services regulatory compliance consulting, have collaborated intensively with BofA in the development of its cloud services. 

Bank of America’s Cathy Bessant, Chief Operations and Technology Officer at Bank of America described the new partnership with IBM through this framework: "This is one of the most important collaborations in the financial services industry cloud space. This industry-first platform will allow Bank of America to use the public cloud, putting data security, resiliency, privacy and customer information safety needs at the forefront of decision making. By setting a standard that addresses the concern of hosting highly-confidential information, we aim to drive the public cloud to a safety level that is unmatched."

As a practical matter, what all this means is the several hundred hours a bank spends verifying the security and compliance of its applications each year is greatly reduced - enabled by the array of security and regulatory "controls" built into the IBM Cloud. This efficiency also extends to the validated fintech partners that comprise the IBM Cloud for Financial Services ecosystem.

Never let a good crisis go to waste

The financial services industry is at a crucial moment in how it responds to the current crisis. What’s critical for financial institutions is how they respond, who they partner with to best serve the needs of their customers and their communities, and which technologies will best enable them to build flexibility, agility, and respond quickly to our ever changing environment. 

Given the critical nature of banking services in everyday life, a great deal is at stake.  

Choose your partners wisely indeed. 

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This article was sponsored by IBM. Learn more about their solutions at https://www.ibm.com/banking. 

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