Financial services firms are set to increase their investment in cloud technology over the next two years, citing the prospects for business and revenue growth, according to a new financial services study by Capco and Wipro FullStride Cloud Services.
The study, ‘Cloud’s Transformation of Financial Services’, found that 62% of financial services leaders believe the deployment of cloud technologies will increase future revenues, while 52% believe it will improve future profitability.
Banks' cloud spending averaged $36 million in 2021, rising to $41 million for capital markets firms and $55 million for insurance companies.
The report reveals firms are running, on average, 38% of their business applications through the cloud, and anticipates the percentage will increase to 55% in two years.
It also highlights that the pandemic increased institutions’ willingness to make cloud investments, to 49% of banks, 52% of capital market firms and 45% of insurers.
Further highlights from the report are that financial service institutions have started their journey toward full digital implementation in the cloud, and anticipate moving forward to realize that vision.
The main challenges raised in the implementation of cloud technology include deciding on the best technology options, uncertainty around the return on investment and use cases, as well as a lack of enterprise-wide strategy and roadmap.
Over the next two years, financial services leaders expect to make their most significant cloud investments in product development/research and development (62%), cybersecurity (48%), and business development and sales (42%).
Last year, a survey by banking software provider Temenos revealed that seven in 10 bank IT executives were incorporating cloud technology into products to help them achieve their business priorities, with cost reduction the main driver for adopting cloud technology.
Peter Kennedy, partner and cloud lead at Capco, comments: “We believe financial services firms often do not consider the total cost benefits when measuring return on investment (ROI) on the cloud. Only 40% cite benefits arising from decreased non-IT costs, and even fewer measure reduced carbon footprint, accelerated time to market, or improved productivity.”
“Roadmaps that chartered a digital journey for the entire organization were slow to emerge, if at all. Early in the transformation process it is crucial to develop an enterprise-wide cloud strategy and roadmap that details technology choices, governance measures and spending priorities, and that moderates other potential battlegrounds that can dilute implementation,” Kennedy adds.
Wipro’s FullStride Cloud Services study is based on 1,300 responses across 11 industries, of which 26% are drawn from financial services — specifically, banking, insurance and capital markets, including wealth advisory and asset management firms.
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