“Survival of the fittest” is one of the most basic principles of evolution. However, the concept also applies to the world of business. As companies march forward on their digital transformation journey— leveraging emerging technologies and digitizing standard processes for maximum advantage—market competition has become fiercer than ever before, and within crowded industries, players vie for consumer attention.
One such industry leading the pack in business evolution is financial services.
While on the surface Wall Street may appear conservative and risk-averse, when it comes to IT, the financial services industry has continually led the adoption of new technologies—sometimes out of a drive for innovation, and other times out of necessity.
So, how do financial services providers differentiate themselves? Often, they offer more or less the same core services and, as a result, must look for every added opportunity to gain a competitive edge. This need to differentiate creates enormous pressure to innovate and adopt new service offerings. As companies clamor for an outlet to explore new service options, the cloud has emerged as a welcome solution.
The financial services sector has been one of the earliest proponents of the notion that every company is a tech company. As a result, the industry has always remained at the forefront of adopting the latest and greatest tech. In a similar vein, it has also been among the first to utilize the latest cloud services.
According to Amazon Web Services (AWS) spending trends analyzed by CloudHealth by VMware, in 2018, 69% of the total cloud spend from financial institutions was on compute infrastructure. As of January 2019, that percentage dropped to 55%.
The reason? Financial services companies are shifting away from treating the cloud as just another data center with traditional virtual machines, storage, and networks. Instead, they are taking advantage of its latest offerings such as containers, serverless architectures, and analytics to help fuel innovation. This shift—from Cloud 1.0 to Cloud 2.0—enables organizations to truly unlock the benefits that the cloud promises: agility, elasticity, and scalability. While all these new cloud services had significant growth in the financial services industry, none saw more than analytics.
Cloud and Compliance Go Head-to-Head
Financial services institutions—which are already heavily reliant on analytics—are realizing they can save time, money, and resources by utilizing the big data, analytics, and machine learning services offered by cloud providers. Today, services such as Amazon Redshift, Elasticsearch, Elastic MapReduce, and Kinesis are extremely popular among financial services institutions, with adoption growing rapidly between 2018 and 2019. This wasn’t always the case, however.
Historically, the stringent regulations enforced in the finance sector and other highly regulated industries, such as healthcare and insurance, have proved challenging for cloud providers. Without proper security built in, cloud computing in the finance sector was often limited to supporting auxiliary business processes for customer service, admin systems, and human resources. While these types of processes can certainly benefit from cloud analytics, financial services organizations were in need of a more complete shift to the cloud to fully reap the benefits.