In finance, customer experience has been thoroughly transformed by digital initiatives, with banking apps and digital services fundamentally reshaping how consumers interact with their money. But from a back office standpoint, these new tools are still, by and large, “glued” to legacy core banking systems and missing out on the kind of cloud migration and digital transformation initiatives that have had major impacts in sectors like manufacturing or hospitality sphere.
On its face, the financial sector’s weariness about optimizing their legacy network architectures for cloud migration isn’t wholly unreasonable. The data-center-centric network model of year’s past allows organizations to store data on premises at headquarters and allows teams to put a virtual citadel of firewalls around it. This is especially attractive in an age of increased regulations, ala the EU’s GDPR and California’s own Consumer Privacy Act, which call for greater scrutiny of security best practices where customer data is concerned.
But while increased regulation generally leads to industries taking less risk instead of more—and the move to cloud where PII is concerned has long been considered risky—the regulations themselves are actually demanding financial services to be more agile with how they store and share data, not less. Take, for instance, Chapter 3 of GDPR, which outlines the Rights of the data subject, including the right to immediately access, delete, or modify PII, lest organizations find themselves on the hook for significant fines. With core networks that are optimized for cloud migration, organizations can help curb potential delays where data requests are involved, and potentially speed up operations in general.
As a result, the barriers of cloud adoption are coming down within finance as more sophisticated technologies related to finance (fintech) and regulation (regtech) are maturing and becoming increasingly viable — if not inevitable — ways of reshaping the business.
Regulation driving cloud migration, not halting it
The conventional wisdom is that when data leaves a private data center and enters a cloud environment, the potential security vulnerabilities are so great that it’s not worth the risk for financial services. But between 2008 and 2015, regulatory change has increased by 492 percent, which has called for companies to quickly adopt strict protections and transactional standards, lest they be on the hook for hefty noncompliance fines.
Regtech solutions delivered “as-a-Service” can help teams contend with the unprecedented rate of regulatory change without slowing down their ability to support and grow their customer base. It’s not dissimilar to how companies have adopted SaaS solutions to help them quickly adopt and deploy new workflows without exhausting their budgets when other potentially bank-breaking roadblocks spring up.
Regtech can offer consistency of regulatory application, speeding up the time it takes to identify information and documentation that requires specific protections or permissions. This kind of software also can evolve immediately with new regulation, putting the control burden on the regtech provider to stay on top of best practices opposed to financial IT.
Fintech answers the “digital-first” call from consumers
The rise of fintech has been less of a response to how banks can function than a reaction to both consumer tastes and industry disruptors. As consumers have become more accustomed to using mobile apps for almost every transaction, traditional banks need to look into developing their own solutions to stay competitive.
This signals a big departure from the days when digital transformation was only considered the realm of retail banking. Today, corporate, commercial, business and investment banking clients all demand fast and convenient digital experiences akin to what’s available through every other channel they interact with in their day-to-day lives.
We’re approaching a tipping point in our society where an entire generation will have grown up in a primarily digital world by the end of the decade. Regardless of industry, the businesses that are able to deliver value and convenience through digital channels are the ones that are going to succeed in the future. That means old-school banks will need to shake off their fears about moving to the cloud, leverage solutions that help them implement new workflows with ease and security, and maintain visibility across their networks.
Part and parcel with these changes will be a greater emphasis on the need for financial organizations to shore up their IT and network operations teams with the tools they need not just to secure data, but to keep the wealth of new tools and workflows performing up to acceptable business standards. At the end of the day, teams need to be able to ensure they’re leveraging the right network management tools, but more importantly the right network performance monitoring solutions that can see into cloud environments and ensure IT has visibility into every app, device, user and data packet their network supports.