‘Successful migrations involve people, culture, and training’: Accelerating cloud adoption in banking and capital markets 

As the world turns toward digital, the financial services industry is keeping pace by embracing advanced technology to stay ahead of the curve. Bank spending on cloud computing services is forecast to grow more than 16% a year through 2024, to $77 billion, compared with 4.5% annual increases in their overall IT budgets, according to research by IDC.

While cloud technology is evolving how banks operate and handle their business, challenges remain. I spoke with John Kain, head of worldwide financial services market development at Amazon Web Services, about how cloud technology benefits banks, the struggle to harmonize with emerging compliance requirements, and the challenges involved in cloud migration.

According to a Deloitte survey, 95% of banks and capital markets firms consider the cloud as the cornerstone of their digital strategy, yet only 35% see very high value stemming from their efforts. Why?

John Kain, AWS: FIs are in different stages of cloud adoption, which has an impact on the level of value they see. Some customers, such as Wellington Management and Sallie Mae, have seen transformational benefits after completing a full migration to AWS. Additionally, Capital One completed its migration to become a fully digital bank, which led to a 99% reduction in application development time for new infrastructure, more rapid innovation, and the ability to unlock data and fuel machine learning to enhance customer experiences. 

Customers realizing the most value have executive leadership that aligns with the vision and use case for cloud adoption and communicates it consistently across the organization to create awareness and commitment. They focus their cloud efforts to align with their business strategy. Examples include delivering more engaging customer outcomes, as with NatWest, cost optimization and operational excellence, as with PennyMac, revenue generation, and new market entry.

As these organizations begin their migration or the next step in modernizing their technology and exploring new capabilities, they focus on building skills and developing talent. At the same time, they focus on creating meaningful impact early by identifying three to five applications that will deliver results, and then building what the apps need. Once running on AWS, there will be learnings from what works, what is repeatable, and what needs improvement. They organize their teams to enable cross-functional working, leveraging AWS expertise and system integrator partners to augment their teams, where needed, until they have built a sustainable capability within their organization. With the enduring capability in place and lessons learned, they iterate on what they have built, set goals, measure progress, recognize skills, and reward outcomes.

Regulatory compliance is a broad term and remains an ever-changing area. How does that affect cloud providers and their services for FIs?

John Kain, AWS: Within the financial services industry, we understand that regulations change to keep pace with a constantly evolving industry. We have invested heavily in teams and resources to help customers meet their regulatory requirements.

We work closely with customers to help them employ best practices for cloud governance and risk management. Our Financial Services Compliance Specialists team — made up of subject matter experts with backgrounds in banking, insurance, capital markets, and payments, as well as former regulators, information security experts, governance and audit professionals, and technology leaders — advise customers on best practices for cloud governance, risk, and compliance. The breadth of our real-world experience enables us to share best practices and further strengthen our capabilities in our support for customers. As an example, our AWS team collaborated with The Options Clearing Corporation (OCC) on its cloud infrastructure framework and received a notice of no objection from the SEC.

The AWS Well-Architected Framework is also an important tool for our customers to demonstrate the application of best practices for cloud architecture and operations across six pillars, including security and reliability. We also introduced the sustainability pillar to address another area coming into greater focus for some regulators.

What are the challenges associated with cloud computing and its adoption in the financial services industry?

John Kain, AWS: Financial services institutions are no longer evaluating if they should move to the cloud. Instead, they are asking where to start or how to accelerate and scale their cloud adoption. We see customers in the financial services industry migrate to and build on AWS to reduce the burden of on-premises systems, primarily for cost savings and increased agility, and to drive innovation and business growth by harnessing data and developing new digital products, experiences, and distribution channels.

As financial services institutions migrate to and build on the cloud, resiliency, security, data privacy, and compliance with regulations are as important as ever. In addition, the need to find the right talent to support cloud transformation is an ongoing challenge.

Successful cloud migrations involve people, culture, and training. Challenges also tend to stem from these areas. There is no universal approach to cloud adoption that works well for every unique enterprise structure, but there are key elements that create a strong foundation for success. These critical components for success include alignment among senior leadership on the vision that is clearly communicated across the organization for commitment and clarity, with a focus on skills building and talent development among other things.