Blog: Accelerating change through technology – Pinsent Masons

Financial institutions will always say that technology is key to accelerating change – the challenges were all about making it happen in practice. The Covid-19 pandemic pushed organisations to adapt in record time and to use technology to solve problems faster than ever before.

A few months into the pandemic, Microsoft CEO Satya Nadella said that Microsoft had seen “two years of digital transformation in two months”, as customers adopted cloud solutions at pace. As we emerge from the pandemic, for many financial institutions, the short and medium-term goals are all about keeping the ‘pedal to the metal’ in terms of changing how services are delivered to customers. The alternative is to risk irrelevance.

The infrastructure on which financial institutions rely is fundamental to the evolution of their service delivery. The biggest change has been the move to the cloud by financial institutions.

Financial institutions can be divided broadly into two groups – those who are seeking to move to the cloud to take advantage of the benefits it offers, and those who were ‘born in the cloud’. Typically the latter will be challenger financial institutions and the fintechs which established financial institutions compete with. There is little room left for a third group – financial institutions not willing to consider any cloud adoption at all.

Drivers for moving to the cloud

Some of the key drivers for moving to the cloud are:

  • pressure on financial institutions to put new services online – during the pandemic the existing demand quickened;
  • making strategic use of data: the cloud’s ability to break down data siloes and allow financial institutions to have a more rounded view of the end customer. Cloud also offers the computing power needed to generate more frequent, accurate insights. Established financial institutions have enormous data lakes, but struggle to use them strategically if the data is stuck in siloes;
  • the emergence of open application programming interfaces (APIs) in Europe and beyond: APIs drive inter-connection between banks and third-party solution providers, and that in turn spurs on banks to adjust their underlying architecture to make it more customisable and scalable
  • the need to be resilient and withstand shocks such as the pandemic, and ensure always-on availability

Financial services firms have been using the cloud for some time. In 2017 Pinsent Masons collaborated with UK Finance on a study on the challenges that banks faced when moving to the cloud.

Since that time, the rationale for financial institutions to move to the cloud has only become stronger. The challenges identified in 2017, such as issues concerning the management of data, the effective supervision of a cloud providers, and concerns around data location and access, have not entirely gone away, but they have been mitigated.

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