Financial firms say public cloud projects are delivering better-than-expected cost reductions and enabling innovation, but data privacy and regulatory concerns are slowing adoption.
Financial institutions estimate they will allocate almost half (48%) of their IT budgets to spending on public cloud services in 2020, up from 41% this year and 34% in 2018, according to new research from Refinitiv.
The findings are based on a survey of 300 global financial firms on the use of cloud technology for financial data.
According to Refinitiv, banks and asset managers are looking to the cloud to help them move away from expensive legacy data infrastructure, improve their ability to innovate, and apply sophisticated AI-based analytics to large and disparate datasets on demand.
The shift to cloud follows a wave of successful projects reportedly being completed, with three quarters (76%) of respondents to the research saying that public cloud projects have performed better than expected when it came to delivering an immediate cost reduction. No projects were said to have performed worse than expected.
Hedge funds in particular reported high success rates in achieving immediate cost savings, with 91% saying their projects performed better than expected.
“We’re entering a more mature phase for cloud adoption in the financial sector, as the industry has completed many successful projects that justify increased investment,” says Marion Leslie, global head of enterprise front-office propositions at Refinitiv.
“Blockers are falling away as the technology evolves and the transformational impact of big data, analytics and artificial intelligence enabled by cloud becomes real and generates increased interest.”
More than half of the industry’s completed cloud projects also delivered better than expected results when it came to speed of implementation and low cost of experimentation, highlighting the innovation dividend cloud services can unlock, the report says.
When asked how transformational cloud would be for the sector over the next 5 -10 years, almost two-thirds (64%) said that the cloud will be either ‘transformational’ or ‘significant’, while only around a third (36%) described the transformational impact of the technology as ‘minor’. No respondents said that the cloud was not at all transformational.
While the survey found firms to be positive about the benefits of the cloud, many firms are finding challenges in implementing cloud solutions effectively, leading to longer-than-expected migrations of key workloads across front, middle and back office functions.
The biggest challenge identified was managing data privacy controls across multiple datasets in different locations, cited by 51% of respondents. The vast majority (94%) of firms also said their businesses were limiting their use of the cloud in some way because of regulatory concerns.
“Challenges remain in using the technology and our research found that the journey to the cloud is taking the industry longer than expected,” said Leslie. “Using the technology effectively requires new ways of working and new commercial models in order to harness cloud economics effectively.”
The full report is available here.