Why hybrid cloud is the key to digital transformation in the financial services industry

Date posted
10 September 2020
Reading time
10 Minutes
Rory Hinshelwood

Why hybrid cloud is the key to digital transformation in the financial services industry

'The digitisation of everything is coming' says Stephen Man, Global Head of Technology and Change (Banks & Broker Dealers), HSBC Securities Services. This belief was demonstrated with HSBC's new partnership with AWS announced last month. Yet many banks and senior management teams are still reluctant to invest in the digitalisation of their businesses. This seems surprising considering the mounting pressure on modern day banks to meet regulatory demands for increased transparency, new standards for customer service, higher capital requirements as well as pressure from shareholders expecting faster growth and higher margins. Large banks who fail to competitively innovate are losing out to agile fintechs offering more user-friendly services and adapting quickly to changing markets. A skill that has proved invaluable since the coronavirus outbreak.

The current technology infrastructure in the financial industry, despite its age, has managed well in the face of rapid technological advancement. However, such systems are being criticised for their monolithic structure and the difficulty and cost that results from trying to modernise them with new processes and architecture. What's more, legacy applications' necessity for manual intervention and human intermediation is inefficient and makes it very hard to minimise overheads. Digitalisation through cloud can reverse such effects. It can put organisations back on top of competitors and in front of customers.

Cloud can do this by provisioning businesses with a globally accessible pool of data, allowing them to improve monitoring, security, control, organisation and agility by acting as a pipeline for further digital transformation with technologies like AI, RPAs and APIs. It can also increase cost savings through greater automation.

Barriers and benefits to digitalising legacy infrastructure

One of the main perceived barriers to digitalising such infrastructure is that it will cause disruption and involve a lot of risk. However, such a process can be done gradually thereby taking longer than a typical 'lift and shift' but will avoid excessive disruption. This can be done via a process known as the strangler pattern where organisations build modern data layers above legacy technology therefore gradually phasing out old systems with a level of orchestration between them. Organisations can also create hybrid cloud systems that are a mix of on-premises/private cloud and public cloud services. This cloud option could prove to be incredibly beneficial to the financial services industry who can benefit from greater flexibility and data deployment whilst retaining sovereignty and allowing a slower full cloud migration.

Let's assess some of the examples of where hybrid cloud can benefit the financial services;

Hybrid cloud can be used to manage dynamic and changeable workloads. Private cloud can be used to house and run particular applications or the most sensitive data, whilst using public cloud to access additional resources as and when needed.

Another benefit is big data processing. A business could use private cloud and existing storage to retain its accumulated business, sales, test and other data, and then run analytical queries in the public cloud.

It can also facilitate the use and combination of a broader mix of IT services. A company could run a mission-critical workload within a private cloud but store the data in the public cloud.

Lessons for the Financial Services industry from the UK Government

The financial services industry is not alone in its need for a hybrid or gradually implemented cloud services. As Andy Scotland, Head of Delivery at Kainos, showed, the financial services industry can learn a lot from the UK government who also deals with incredibly sensitive information, owns monolithic structures and legacy applications and have already begun their digital transformation by adopting hybrid cloud. This is something that Kainos has played a key role in and developed significant experience in over the past eight years. Through its certified partnerships with AWS and Microsoft Azure, Kainos has aided the government in re-engineering citizen services from front to back, incrementally and enabled them to put customers and users at the heart of the transformation. This approach can be emulated and is necessary if businesses within the financial services industry are to innovate and stay ahead of the curve.

If you're ready to make the move to public cloud but don't know where to start, or have started but need help completing the journey, then Kainos can help, drawing on the breadth of experience we have of designing, building, modernising and delivering services on the public cloud. Kainos have the cloud adoption expertise to help the transformation of your business. We have a proven track record of enabling organisations migrate, modernise and manage their digital platforms in the cloud and realise the full financial, business and agility benefits available. We won't just talk you through the theory of migration, we will show you how and where we have done it for our customers in complex and business critical environments. Visit our Starting the Cloud Journey page to find out more.

About the author

Rory Hinshelwood