Three reasons why cloud services will revolutionize financial services
Cloud computing services are one of the fastest growing areas in the tech industry and they becoming essential for a swathe of industries, especially the financial services industry. The overwhelming majority of banks and insurance companies have already or are considering switching to cloud services and they seem them as a key step in their digital transformation journey.
But before we go any further, have you ever wondered what cloud computing was? Well, here is a short explainer video…
According to Microsoft, the term cloud service refers to “the delivery of computing services — including servers, storage, databases, networking, software, analytics, and intelligence — over the Internet (“the cloud”) to offer faster innovation, flexible resources, and economies of scale”.
Cloud services offer many advantages for financial institutions. Here are just three reasons why the adoption of cloud service will continue to grow in the future.
Flexibility, Scalability, Reliability…
Flexibility: Cloud computing is considered as a driver for growth for banks as it offer flexibility. It allows companies to choose the services they need among a range of services by selecting an operating system, programming langage, web app platform, or database that is most suited to the business. It offers a virtual environment which allows the upload of software and services your company needs. It’s also cost efficient as the company does not have to invest in a cloud infrastructure (buying hardware and software) or set-up and run on-site datacenters. As banks and other financial services institutions are keeping up with critical market changes and looking carefully at their profitability, these cost-efficient solutions are of an utmost importance for the resilience of their business.
Scalability: the cloud offers the ability to store a larger amount of data. As a result, it offers the possiblity to monitor the size of the computing power, storage, or bandwidth — right when it is needed and from the right geographic location.
Reliability: Last but not least, the cloud offer a higher level of security and reliability as it enables an accessible and secured data backup, facilitates disaster recovery ensures business continuity for a limited cost.
A fast growing market…
According to Gartner, the global public cloud services market is set to reach $266.4 billion by 2020, coming from $227.8 billion in 2019 (+17%). The market growth is forecasted to remain dynamic and robust.
“Adoption of next-generation solutions are almost always ‘cloud-enhanced’ solutions, meaning they build on the strengths of a cloud platform to deliver digital business capabilities,” explains Sid Nag, research vice president at Gartner.
How many types and which cloud is suitable for your business?
There are three types of cloud computing services:
- IaaS (infrastructure as a service): for IT admins.
- PaaS (Platform as a service): for software developers.
- SaaS (Software as a service): for end customers.
Who are the providers?
Top providers are main tech giants such as Microsoft (Azure), Amazon (AWS), Google Cloud platform, IBM, Oracle, SAP, etc…
How Amazon is running ahead of the curve among the top providers…
Amazon has evolved into an integrated company. To its traditional online retail business, the group added the cloud infrastructure services (AWS) and Brick and Mortar retail business(Wholefoods).
But let’s stick to Amazon’s cloud business and the way the tech giant’s solution is dominating the industry. With a market share of 39% in 2019, AWS is the leader in public cloud services.
How AWS is performing?
The financial performances of AWS are in line with the market growth in the last years and they have been tremendous: the quarterly revenue of AWS has been multiplied by 8 within between 2014 and 2019, it represents an average annual growth rate of 51.5%! Few businesses have performed better!
In conclusion, cloud service adoption by large companies in the finance sector has been accelerating, and Amazon has not hidden its ambition to strengthen its footprint in the global market and mainly in Europe. As an illustration, AWS has convinced large financial institutions such as Capital One (USA), Bankinter (Spain), Banque Nationale du Canada, HSBC and Pacific Life to get on board.
In France, Societe Generale switched to AWS in 2018, even if only 20 to 30% of its infrastructure has been switched to public cloud services like AWS. The leader in the French banking sector BNP Paribas preferred IBM solution over AWS, announcing that it expected to launch with them in July 2020.
This situation shows that large financial institutions will continue to rely on large tech firms’ cloud computing expertise to continue performing their digital transformation and find new growth drivers.
