The last couple of years have seen a dramatic acceleration of digitalisation across industries and the financial services sector is no exception. Not only have customer-facing roles embraced digital to provide faster, more flexible and improved customer service, but increasingly ‘back-end’ technologies have migrated to the cloud increasing agility and lowering costs. However, many financial services businesses find themselves at a fork in the road. Much of the ‘low hanging fruit’ has been harvested – the obvious and easy to shift applications are already in the cloud. Harder choices must now be made as organisations weight the risks and opportunities of moving more sensitive data and analytics processes into the cloud. Often these debates require common ground to be found between different parts of the organisation with competing priorities. Squaring the circle of cost advantages, agility and flexibility with the demands of regulation, security and data protection is possible and is the key to becoming truly customer-centric banks of the future.
Initial moves to the cloud have been driven by cost savings and pioneered by IT departments keen to reduce capex and unwieldy licences with responsive pay-as-you-go service models. Most of the workloads moved to the cloud so far can be categorised as ‘Enterprise.’ Indeed, research by Accenture suggests that 70% of enterprise workloads such as collaboration and productivity, marketing, HR and procurement-related software are now hosted in the cloud. The same research shows that data and analytics is catching up with 51% of workloads now at least partially in the cloud. However, the majority of these are related to data storage and governance, data access and reporting, or data onboarding and management. Analytics for risk, pricing or consumer and commercial teams represent only 4% of tasks migrating to the cloud to date.
Yet, as McKinsey points out, in light of the need to “Process greater amounts of data in shorter amounts of time—often amid budget and staff constraints—cloud computing could unlock considerable benefits.” McKinsey was speaking specifically about migrating risk analytics to the cloud, but the benefits of flexibility and scalability are applicable across the bank’s functions. Data analytics that can work at speed and scale to provide near real-time insights at individual customer and transaction level are the foundation for financial services focused on meeting customer precise needs in the moment rather than selling a predefined set of products and services. The cloud represents the ultimate scalable architecture to do this.
Against these benefits banks weight the potential risks. Security is often cited, although the investments and resources deployed by the leading cloud providers mean that their services are among the most secure available. Data protection, and increasingly data sovereignty issues can be a challenge, both regulators and institutions themselves prefer to have personal and sensitive data stored within specific jurisdictions and safe from the legislative reach of foreign powers. Finally, regulators are increasingly concerned about risks to operational resilience from concentrating too much data in too few clouds. The systemic risk of a major cloud outage has been raised by both the European Banking Authority and the Bank of England. These entirely appropriate business concerns must be addressed if the full benefits of the cloud are to be realised.
A hybrid, multi-cloud approach can meet the requirements of both business and IT teams in financial services. Unlike many other cloud-based analytics tools, Teradata has the speed and scalability to analyse vast amounts of data in real time. Not only does this make it perfect for high-stakes, in-the-moment AI-based decisions in the area of fraud prevention for example, but capable of integrating granular data from multiple sources to better meet the specific financial needs of individual customers. Teradata’s cloud first strategy delivers the power of its enterprise-scale analytics in whichever clouds financial services organisations use. Uniquely it also offers on-premise options so any organisation has the ability not only to move data and analytics capabilities between clouds, but also back in-house should it be necessary. Regulators, governance risk and compliance officers and business leaders will all appreciate this flexibility and the operational resilience it provides.
The portability that ensures Teradata can be easily deployed on multi-cloud as well as on premise is one of the features called out by Gartner’s most recent Magic Quadrant for Cloud Database Management Systems. It also scored Teradata highest in 4 out of 4 use cases for analytics in the cloud. What this means for financials services is that they can be assured of the critical certainty of performance that comes from a proven track record. Portability provides the operational resilience the business must demonstrate, and some of the lowest total costs of ownership means that cost savings are not a one-off but continue to grow as more and more analytical models are deployed.
So, if you are at a crossroads, and are unsure of the next best step to take into the cloud, come and talk to Teradata about our enterprise data analytics for hybrid, multi-cloud so that you can plan the right journey. In the next blog we’ll look in depth at what this looks like in action.