Banks also hesitate to adopt cloud technologies due to existing structural impediments that stand in the way of transforming existing infrastructures and managing the migration from often complex in-house legacy IT systems that currently run the banks' critical functions.
Jumping across hurdles
There is no silver bullet or one-size-fits-all solution in addressing these concerns, but financial institutions seeking to move to the cloud can take advantage of the concerted efforts made by industry players to ease the transition.
Industry associations, government and regulatory authorities, platform partners and cloud software vendors, among others are working together to support banks in overcoming barriers faced when deploying cloud solutions so that they too are able to leverage the immense potential of the cloud.
These include efforts such as those by global industry group Cloud Security Alliance whohas set up security principles through its Cloud Controls Matrix initiative to guide cloud vendors and assist prospective cloud customers in assessing the security risks of cloud providers worldwide.
Closer to home, the Monetary Authority of Singapore's Technology Risk Management Guidelines aims to equip financial institutions with risk management principles and best practice standards to establish a technology risk management framework, as well as to ensure the deployment of strong authentication in protecting customer data.
Vendors also play a part in addressing security concerns of banks looking to move to the cloud. For example, cloud providers are investing heavily in compliance and security expertise.
By using a cloud-based model, banking software is centrally hosted, reducing the IT risk for financial institutions and freeing up in-house resources for more strategic projects.Observers add that a well-implemented migration to the cloud,which provides access to real-time reporting mechanisms, could even result in higher levels of security compared to traditional in-house systems.
For banks and financial institutions who are hesitant to move to the cloud because of the potential need to overhaul existing infrastructure, cloud vendors are able to cater to their appetites by offering bite-sized optionsfor migrating to the cloud. One possible route is to start small with non-core activities like mobile and order management, and eventually move on to more important core activities once banks are convinced of the results that the cloud can deliver.
The way forward
Regardless of how banks are approaching the cloud era, it is clear that change is happening. By 2016, Gartner estimates that more than 60 percent of global banks will process the majority of their transactions in the cloud. Many financial institutions are already moving less sensitive functions there and developing strategies to enable them to tapthe advantages of cloud-based systems for their core operations.
Banks today face growing competition from current players and new entrants from non-banking sectors. To maximise their profitability in the digital economy, banks must seriously consider channelling their investment in IT to what is viewed asone of the most productive and efficient systems today - the cloud - or risk falling behind.