Banks are saddled with a need to do more with less… less return on equity, that is.
More stringent regulatory capital requirements leave less money to invest for financial gain, a disturbing development for investors. Rather than reduce costs by traditional means, some banks appear to be reassessing their models of doing business and looking for new revenue-producing possibilities that cloud computing can offer. Much of the cloud eco-system is untilled ground for them.
The banking industry’s reticence to integrate cloud computing into their business may have actually paid off. They are no less risk-averse than they ever were, which is why banking is pulling up the rear of all industries when it comes to cloud adoption. Perhaps they’re even more averse now with the recent wave of regulations washing over them, as those instituted in the Dodd-Frank Act.
However, while they held back, the capabilities and offerings of the cloud industry have advanced and continue to advance in a torrent. The cloud maturity model is on the upswing, and early adopters have had their day. Thanks to the NSA and retail data breaches, cloud security – including products, strategies, architectures and best practices – is receiving even more attention now than before. An article in Computerworld reports that IT security officials are looking at several key areas, such as data encryption, key management and data ownership, regionalization and the need for increased government transparency to improve cloud security.
Many assumed these security events would dampen cloud growth in general. Apparently they have not. Growth continues unabated because the financial and business benefits outweigh security risks.
One leading industry research group forecasts big changes for banking in, or on the cloud, saying that this is where more than 60 percent of banks worldwide will process most of their transactions. They could accomplish this through a variety of cloud service models but, regardless, cloud will provide the means.
Continued reluctance on the part of banks is inviting consumer backlash and customer churn. Speed, mobility, social interaction and availability via the Internet are all intractable forces. Rather than view them as threats, see these consumer preferences as a means to reduce the cost of customer service and transactions while establishing relationships.
Instead of driving customers to brick-and-mortar branches, pinpoint individual preferences, anticipate needs and provide tailored offers online. Realize that customers of banking services do not need to touch and feel the merchandise as in a retail store before making a selection or doing online prices checks in the aisle. They never have to leave their homes to compare banking services, rates and customer reviews.
Banks must focus on the innovative new products, the consumer data analysis and the competitive differentiators that drive new revenue, and not the back-end systems that process and store data. This should be the year when banks integrate the power of cloud computing into their IT and business strategies.