Financial services (FS) firms are no strangers to innovation. Deep pockets and customer pressure to continually differentiate means that new digital capabilities are constantly in development. Still, this process is not unfettered. With high regulatory pressure, FS firms innovate within boundaries, create digital services protected behind corporate firewalls, abide by tenancy isolation rules, and ensure that their systems comply with the tough availability requirements associated with the FS industry. They'll build new digital capabilities in the name of differentiation and speed, even if the task is massively expensive and time-consuming. FS companies spent $300 million on a fiber-optic cable to connect New York City to London, all in the name of reducing stock-trading latency to less than 60 milliseconds.
Whether it is early community clouds, OpenStack, Kubernetes, or otherwise, the top FS firms have always been eager to trial leading-edge technologies to enable faster decision-making, big data analytics, or more efficient operations. But this was always with the intent of applying to private cloud environments, despite major enterprise adoption of public cloud. Public cloud, with its multitenant systems, new architectural/security requirements, and minimal service-level agreements, was used only used for peripheral, customer-facing scenarios. Core systems were never used in the same sentence as public cloud.
That narrative started to change in 2015 when Capital One shocked the industry with its all-in approach on Amazon Web Services. Capital One claimed that its requirements of greater security could be handled in the public cloud, contrary to most FS firms' qualms that a multitenant approach meant lowered security. Most FS firms, such as Bank of America, heavily leaned on private cloud and could not see a path forward with cloud migration. Since then, much has changed.
The State of Cloud Adoption in Financial Services in 2023
In 2023, it's an entirely different reality. Major banks, wealth managers, insurance companies, and other FS organizations all lean heavily on public cloud for digital banking services. Cloud migration is far more common, and cloud spend is up. In 2022, the average yearly enterprise cloud spend for FS firms was $25 million, according to Forrester's Infrastructure Cloud Survey, 2022. Strategic partnerships have been inked between the major cloud providers and institutional FS organizations such as Goldman Sachs, the London Stock Exchange, Nasdaq, CME Group, HSBC, Bank of America, and BNP Paribas. In turn, many banks have set up advanced recovery scenarios to ensure that they are meeting their requirements in case of a major outage.
For a few years, I've been tracking the latest developments in this market along with the help of my dedicated financial services-focused colleagues, including Meng Liu. We just released The State Of Cloud In Financial Services, 2023, which covers the latest data and key trends going on today. This follows our earlier report, Best Practices For Financial Services In Cloud.
Click on our latest report if you want to learn more about the answers to the following:
- What's driving FS enterprises to public cloud? They may not do (much) stock trading on the cloud, but they do see benefits such as improved disaster recovery and business continuity and better analytics.
- What are FS organizations using public cloud for? Many are looking at a mix of lowering their total infrastructure costs and providing developers with fast and easy resources for development.
- What should FS firms be aware of? Every major economy heavily regulates the FS industry. Plan for this expansion to cloud. Don't see this as a barrier to cloud, however. In some cases, it may be a cloud adoption driver.
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Interested in more industry-level cloud content? This is the fifth of our series covering the "state of cloud" for different verticals. In each report, we look at cloud adoption rates, modernization and migration strategies, implementation of edge technologies alongside cloud capabilities, and the rising use of industry clouds. Check out the full series:
The State Of Cloud In Retail, 2023
The State Of Cloud In Financial Services, 2023
The State Of Cloud In Government, 2022
The State Of Cloud In Utilities And Telecommunications, 2023
The State Of Cloud In Gaming, Media, And Entertainment, 2023
This article originally appeared on Forrester's Featured Blogs.