For financial institutions, digital transformation is no longer a priority—it’s an imperative for success. The pandemic, rising customer expectations, financial technology disruptors, cybercrimes, open banking, and the rise of new technologies have challenged the status quo of traditional financial services.
Financial services institutions (FSIs) are under pressure to reimagine financial customer services and products. As they move ahead with digital innovation, they need to prioritize these four key areas:
- Digital trust and compliance. Cyberattacks have surged in the pandemic, particularly against the financial sector. A VMware study registered a 238% surge in attacks in 2020 from February to April, 27% of which targeted the health and financial sectors.
- Digital resilience. Because resilience is a sharp focus in COVID-19 crisis recovery, building digital resilience is a boardroom priority.
- Data control and complexity. IDC predicts that 5% to 10% of bank revenues will be based on data monetization and information-based products, making data mastery a necessary strategy.
- Data mobility, infrastructure, and data management. Limited visibility into data, data silos, and the spiraling costs of data management were cited by financial services in the top five data management challenges, according to IDC’s 2020 multicloud survey.
These priorities require FSIs to adopt cloud capabilities, capitalize on data better, and transform legacy business processes.
Cloud, without doubt, is the key building block for digital innovation for FSIs. But regulatory concerns, concentration risks, outages, growing costs, and the complexities of data portability are making FSIs take an “and” approach, rather than an “or” approach, to public and private cloud. 82% of FSIs are already running hybrid multicloud environments.
Leading FSI brands such as Deutsche Börse are building their cloud platforms with a data-centric, regulation-centric approach.
By prioritizing data and security in their cloud adoption, application modernization, and legacy transformation, FSIs can create a sustainable infrastructure foundation for data-driven digital innovation. About 34% of FSI enterprises have made data monetization and data capitalization a top digital transformation priority. As more data-intensive workloads come, demand for next-generation storage infrastructure, data integration, and cloud data mobility will grow too. FSIs will favor technology providers that deliver a full stack of data mobility, management, and infrastructure services.
IDC believes that having an agnostic data mobility and management strategy can help FSIs to:
- Build deep integration with infrastructure of choice and overcome concentration risks by eliminating data gravity to a specific cloud
- Build on an agile data-driven digital infrastructure to unlock digital innovation
- Pivot to open banking mandates by ensuring secure data federation and sharing strategies
IDC’s research shows that more FSIs will invest in data services such as data protection, security and compliance, data integration and orchestration, and data location optimization to succeed in their hybrid multicloud migration strategies.
2020 was a defining year when FSIs finally moved past their skepticism over the security, regulation, and reliability of cloud. But the actual work has only just begun. As they build the foundation for cloud-centric digital infrastructure, they need to meet the four priorities highlighted earlier (digital trust and compliance, digital resilience, empowered customers and employees, and better data control and efficiency) to unlock the infrastructure’s value.
The good news is that the pandemic has provided nearly every FSI with a new opportunity to create a digital future. The right partners can speed up this learning curve.
The economy remains on course to its digital destiny, with 65% of global GDP digitalized by 2022. It’s projected to generate over $6.8 trillion of direct digital transformation investments in the next 2 to 3 years.
IDC predicts that by 2022, 70% of all organizations will have accelerated the use of digital technologies, transforming existing business processes to promote customer engagement, employee productivity, and business resilience. Savvy FSIs investing in data-aware hybrid multicloud strategies to power financial services innovation are a big part of this future.