Dive Brief:
- Banks are boosting investments in infrastructure and platform services while diversifying their cloud portfolios, according to a London Stock Exchange Group report published Monday. The firm commissioned Phase 5 to survey more than 450 banking IT leaders between November and March.
- Nearly 9 in 10 respondents said their organization increased cloud spend over the last two years and 82% have a hybrid cloud environment or a strategy that leverages more than one cloud provider. Cloud was integral to AI adoption for 91% of banks surveyed.
- “Companies are increasingly driving meaningful value from cloud, improving operational resilience and preparing for the next wave of innovation,” Stuart Brown, group head of data and feeds at LSEG, said in the report. “Over the next three years, that innovation will be driven by AI and machine learning, with financial institutions increasingly using cloud to power fraud detection, risk management, data analytics and generative AI.”
Dive Insight:
As banks evolve their cloud investment strategies, cutting IT costs has become less pressing than using the technology to drive innovation and generate revenue.
Only one-third of respondents to the LSEG survey said their organization currently prioritizes immediate savings through cloud. Instead, financial firms are leaning on cloud to improve customer service today and power long-term growth, LSEG found.
Banks are even willing to shoulder the added cost and complexity of a multicloud enterprise ecosystem to bolster resilience and avoid vendor lock-in, Matt Eddy, global head of real time, quant and economic data solutions at LSEG, told CIO Dive.
“We are seeing an increasing number of clients also now looking at building out parallel environments in multiple cloud providers to avoid concentration risk,” Eddy said in an email. “This may appear overly cautious ... from a geographic resiliency perspective but with many of the more recent catastrophic failures being caused by logical or software issues, this caution appears well founded.”
More than 9 in 10 respondents prioritized operational resilience when selecting a provider. The European Union’s Digital Operational Resilience Act, which gave organizations operating in the region until January of this year to achieve compliance, and the General Data Protection Regulation, enacted in 2018, have also steered banking cloud strategy.
Despite the resource drain of complex hybrid environments, roughly 3 in 5 firms said cloud adoption reduced IT infrastructure costs, LSEG found. Efficiency improvements in data-intensive operations, such as risk mitigation, are an area where banks report major gains.
Banks are shifting risk management to cloud for processing and storage efficiencies, according to Eddy. Data privacy concerns, which have been a migration roadblock, have largely diminished, he said.
More than half of respondents said their firm has seen benefits from migrating risk management, customer engagement and enterprise data workloads. Risk management operations were cloud-based for 83% of the firms surveyed.
Data and compute hungry generative AI use cases are thriving in cloud, as well, according to Eddy.
“Without the hyperscale of public cloud, AI would not be cost effective for many,” Eddy said. “We are seeing more customers looking to leverage LSEG data in cloud and at scale to build new workflows, insights and analytics that even just a few years ago would have been unheard of.”
