Business Continuity
Cloud Migration
Digital Transformation

FinServ's Move To The Cloud: Proponents, Barriers and Paths Forward

Own Company
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The following is a summary of a presentation made by industry experts from US Bank, Deloitte, Salesforce, and Own to representatives from the world’s leading financial services (FinServ) companies. They discussed key banking trends, as well as challenges, benefits, and best practices in digitization.

The gathering of global financial services (FinServ) heavyweights heard first from Camillo Baratta, Manager EMEA Industry Development - FinServ at Salesforce. As he rightly pointed out, since the onset of COVID-19, the physical use of banks has dropped significantly, with customers using branches 5x less and ATMs 2x less. Banks that reacted quickly or that already had a digital-first strategy to serve customers saw their chat, video, and mobile services increase 3x faster in 2020 than in previous years. Satisfaction rates (NPS) went up by 51% as well, at 15% of the cost compared to running branches.

Even beyond the pandemic, there are several other factors driving digital transformation in the FinServ industry.

Five key trends driving additional shifts in FinServ

1. Open banking

Banks are realizing the value behind regulations like PSD2. They’re moving beyond use cases such as digital onboarding and personal finance management to truly customer-centric and disruptive business models. They’re establishing service ecosystems that extend beyond banking and are delivered through seamless customer journeys.

2. Data usage

The systematic use of data is growing in FinServ, though banks are struggling to scale these capabilities enough to generate a significant impact. Banks that lead the pack in this area have three things in place: a clear data strategy, iterations of numerous initiatives and an ongoing roll-out of new use cases, and data capabilities that are embedded into their daily business and management decisions.

3. Competition

Two sources of competition are driving disruption: 1) FinTechs and digital attackers who are addressing customer expectations around convenient UX and 2) BigTechs who already provide industry-leading UX and are now entering new markets. FinTechs and digital attackers are reaching a tipping point where they have proven that they can delight customers. They have very high customer advocacy and operate at 2-3x lower run costs. How? They’re leveraging a cloud-native stack to scale their business to millions of users, and are piggy-backing off a massive increase in the adoption of digital and mobile banking around the globe.

4. Sustainability

Sustainability is the next major revolution in banking — as disruptive as the shift to digital. For banks, this goes beyond environmental, social, and governance (ESG) principles, to truly positioning themselves as a sustainable and trustworthy business. Banks have to ask themselves a tricky question: “Do I provide financing to non-sustainable businesses or do I help non-sustainable businesses become sustainable through my financing?” This is not only relevant from a credit perspective, but also from a customer perspective, as up to 90% of customers are likely to switch to a brand that focuses on ESG. A mindset shift is needed.

5. M&A

Going forward, the industry looks very optimistic for M&As, with favorable conditions for an uplift (i.e., valuations have dropped by 30%, the cost of risk is increasing and the pressure on cost is increasing, and regulators are pushing for consolidation). Historically speaking, banks that invest during downturns reap the benefits post-crisis with an average CAGR of 20% compared to a 6% CAGR for banks that don’t invest during a downturn.

All of this could happen more quickly and efficiently if more FinServ institutions were in the cloud.

So, what's the challenge?

As Joe Cody, Digital Banking Solutions Leader at Deloitte, points out, four challenges slow most banks in their quest to reap the benefits of the approaches above:

1. Technical debt

Technical debt accumulates with multiple legacy systems that are difficult and costly to modernize.

2. Data security

CIOs and tech leaders often need to educate other leaders about how the public cloud and hybrid cloud can be more secure than maintaining data in company-owned servers.

3. Regulations

Regulatory complexity means that FinServ institutions should work with cloud and SaaS providers, yet many shy away from using third-party vendors.

4. Leadership alignment

Well-publicized cyber security incidents mean CIOs often face deep resistance on moving to the cloud. Many give up in the face of this battle.

The use cases and benefits

The reality is that analytics, effective cyber security, and digitization are virtually impossible without the cloud. What’s more, COVID-19 has shown us that banks must adapt to new ways of working, including with cloud-based tools. The future of FinServ is a more automated and cost-effective ecosystem with smart contracts, blockchain, and real-time payments. Below are the use cases, benefits, and required technologies, as outlined by Joe:

How do we get there?

Four best practices can get FinServ institutions into the cloud faster:

1. Create a migration strategy

An enterprise-wide cloud migration strategy with executive sponsorship is a must. It should outline the migration roadmap, support the business case for digitization, and secure alignment across business and IT.

2. Establish data governance

Define your recovery time objective (RTO) and recovery point objective (RPO) – how long you can be without data and how much data you can lose. Also define controls and establish role-based access for data usage. The best practice is having your data backup stored outside of the application.

Own offers daily automated backups, and provides customized, high-frequency backups for companies that use Salesforce. In the event of a data loss, customers are typically restored in minutes, not days.

3. Use secure backup

Meet your regulatory and compliance needs by leveraging data protection applications with strict security protocols. You should provide data encryption while in transit and at rest; require multi-factor authentication; and have single-sign-on, IP restrictions, audit logs, SOC Type II testing, etc. Own provides all these features for institutions using Salesforce.

4. Test disaster recovery

FinServ organizations must have a proven disaster-recovery plan and procedure that’s tested annually. A fast recovery from data loss or data corruption means you maintain business continuity and customer trust.

Use case: U.S. Bank

Good data matters. You can’t test appropriately without it. That’s why, according to Todd Schmidt, VP and Technical Lead, US Bank, you must be able to classify data appropriately (e.g., personal, corporate, or partner data), and sanitize it so it’s reliable during testing. Those sanitization schemes should be uniform and repeatable in a way that’s intuitive and that aligns with security best practices.

“How do we get there at US Bank? Data protection helps us safeguard our important information from corruption, compromise or loss.” - Todd Schmidt, VP and Technical Lead, US Bank

Todd’s team pays attention to five pillars:

  • Time: We don’t hold up development teams.
  • Partners: Internal and external partners help us use the data properly.
  • Transparency: There’s no reason to hide anything. We openly discuss issues and clean them up.
  • Minimum data requirements: What are the minimum data requirements for each environment? If you move large volumes, you risk missing something.
  • Accuracy: A repeatable sanitization process is very helpful in this regard.

What you can do

Today, FinServ institutions are investing in growth. They’re doing that by moving into the cloud at a faster rate than ever before, given the widely recognized gains they can make there. Data protection platforms, such as Own, are an essential partner in this movement.

Learn more about how you can accelerate your digital transformation safely:

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