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Cloud will drive future innovations in European Banks and FS firms

Cloud will drive future innovations in European Banks and FS firms 3

By Narsimha Rao Mannepalli, Executive Vice President, Head – Cloud Infrastructure and Security Solutions and Head – Infosys Validation Solutions, Infosys

In January 2021, leading European financial services (FS) firms came together to announce the European Cloud User Coalition (ECUC), jointly defining security standards and best practices for using cloud technology, particularly the public cloud, for European financial institutions. This highlights the enthusiasm the region has for the cloud and its eagerness to standardize technical and contractual clauses with cloud service providers to ease the adoption of public cloud and ensure compliance with European Union (EU) regulations.

It is a well-known fact that historically FS firms looked at cloud adoption with caution due to apprehensions around security and data privacy. Yet, in the past few years, FS firms are increasingly embracing the public/hybrid cloud for the most compelling reasons. Let’s understand the benefits of both private and public clouds.

Public cloud reduces costs, ensures higher resiliency, and provides faster access to innovation, being managed by a third party with consumption-based pricing, thus avoiding big, upfront investments in technology infrastructure. A private cloud assures the best data security with custom-built, configurable, and scalable solutions while the hybrid (public and private) cloud allows enterprises to scale swiftly and simultaneously keep control within the enterprise for systems that need them.

Public Cloud gains favour with FS Firms as advantages outshine concerns

FS companies favoured private cloud solutions as it allowed them to retain control of the security architecture, however, for economies of scale, flexibility, resilience, and innovation, they have no choice but to adopt the public or hybrid cloud. We, at Infosys, have helped several leading clients in the banking and FS sector adopt the public cloud to improve efficiency, optimize IT costs, enable faster time to market, and create new business capabilities.

Worldwide end-user spending on public cloud services is forecast to grow 23.1% in 2021 to total $332.3 billion, up from $270 billion in 2020, according to the latest forecast from Gartner, Inc. And FS sector is a formidable part of this overall forecast.

Banks and FS firms are discovering that the public cloud can help them transform into digital organizations to improve business process efficiency, be customer-centric, and responsive to the market. The sector is always harangued by issues around cybersecurity and compliance. Managing compliance regulations in a fast-changing environment can be very taxing. With most cloud solutions being secure and compliant, it is easier to move to the cloud and let the cloud service provider handle many of the compliance requirements. Lastly, SaaS is being adopted to bring innovation in functional areas of the industry without any investment especially when processes are standardized.

In 2020, many banks learned that those who had adopted the public cloud fared much better in building resiliency and surviving the pandemic. It helped them run their internal operations without any hindrances and switch over to a flexible, secure work model. Most public cloud providers offer cloud-based Desktop-as-a-Service to enable remote work. Another area where the public cloud has delivered immense value during the COVID-19 pandemic is setting up large-scale virtual call centers.

The formation of the European Cloud User Coalition (ECUC) will encourage banks to adopt public cloud strategies and make it an integral part of IT modernisation.

Let’s look at the current trends in cloud adoption in Europe.

Complying with regulations continues to be in high focus

Most countries in Europe have institutions regulating FS, such as the Financial Conduct Authority in the U.K., which enumerates conditions for outsourcing to the cloud for FS firms – streamlining the move to a public cloud.

With European banking authorities’ new guidelines on cloud outsourcing arrangements mandating an exit strategy, banks are implementing a ‘second line of defence’ to meet regulatory obligations for their multi-cloud platform estate and mitigate critical workloads running on a single cloud provider. Also, the Schrems II judgement means the EU-U.S. Privacy Shield Framework is an insufficient mechanism for compliance with EU data protection requirements, there now being additional regulations cloud providers must comply with for data privacy and data protection.

Nearly every bank has some cloud strategy

 

Financial Services Institutions are leveraging the cloud for digital transformation, creating new customer Journeys, and driving business agility. They are accelerating cloud adoption with a factory model and increasingly moving to a hybrid multi-cloud state securely. The focus is shifting to modernizing applications, building new cloud-native platforms, and unlocking the power of their data on the cloud with analytics and AI/ML use cases. Some of them are also focusing on cloud-neutral and multi-cloud portability. Large banks with distributed, diverse decision-makers require a line of business autonomy and adopt a poly cloud strategy while regional banks who are concerned about data residency and data privacy regulations adopt a hybrid cloud approach.

Leveraging the cloud for better business outcomes and innovation

Cloud enables access to newer technologies like machine learning, artificial intelligence, and data analytics, so implementing a cloud strategy goes beyond financial prudence to provide a competitive advantage. It helps innovate and create new customer experiences, formulate and market new offerings, and aligns technology with business needs. The future of the FS industry surely belongs to the cloud.

Cloud will drive future innovations in European Banks and FS firms 4

About the Author:

Narsimha Rao Mannepalli

Executive Vice President, Head – Cloud Infrastructure and Security Solutions and Head – Infosys Validation Solutions, Infosys

Narsimha Rao Mannepalli is an executive vice president and heads both the Cloud Infrastructure and Security Solutions service line and the Infosys Validation Solutions service line. These business units propose and deliver solutions and services to clients in various industry segments around the world.

In his earlier roles, Mannepalli managed service delivery for clients in insurance and payments, and manufacturing domains. With nearly two decades in Infosys, Mannepalli has played diverse roles across units, and has experience in a number of mainstream service lines such as ADM, IMS, IVS, Enterprise Solutions & Management consulting. He also has a proven track record of managing large units selling and delivering IT solutions and services.

Mannepalli was also head of the Hyderabad Development Center for over 10 years. With a 31000+ workforce, he led the Hyderabad center to being the top exporter in the state for many years in a row, and the best managed center within Infosys in 7 out of 8 years.

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