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Just five years ago, the idea of using cloud services would have seemed wildly optimistic even to the most radical of businesses operating in the financial services sector. But cloud is no longer the new kid on the block. After becoming the word on everybody’s lips a few years ago, it has already plumbed what the Gartner Hype Cycle terms the ‘trough of disillusionment’; often experienced by new technologies as the doubters queue up to question the impact it can have. Cloud is already well on the way towards the ‘slope of enlightenment’, where even business sectors which are traditionally slow to adopt new technology, such as financial services, are now beginning to realise the benefits.

Challenger banks

The UK’s financial services sector is currently undergoing significant change. In the wake of the 2008 financial crisis, regulatory changes designed to stimulate competition in the market have made it easier to set up a new bank. Just two years later, Metro Bank became the first to be awarded a banking licence for 150 years. This new face on the high street is now also joined by a raft of other new names, including Starling and Hampden, which means it is now possible for customers to turn their backs on the traditional big players.

All of these new players on the market are distinct for another reason too – they are all embracing cloud. If you’ve ever glanced in the window of a Metro Bank branch, you will have noticed that there is an element of hot-desking from those who work in its open plan environment. This is possible because the bank is largely paperless, with customer records and bank functions being hosted in the cloud.

Having been born in the 21st century, these newcomers do not carry the burden of legacy systems and can hit the ground running. However, with careful planning and a clear strategy, there is no reason why the financial services industry as a whole can’t more readily embrace cloud.

Public and private cloud

At first glance, using public cloud services from the likes of Amazon and Google might be considered a risky approach due to tight regulation within the industry.

Each different country has its own legislation for the financial services industry, meaning they are free to give the go-ahead for cloud adoption within their own borders. Take the Netherlands, for example, where national bank ING has given use of Amazon Web Services the green light. Although the legal barrier is being removed from the path of some, a private cloud approach is still the more likely option for most financial services organisations. Private cloud offers greater control which is vital for financial services organisations concerned about security and compliance.

Barriers to overcome

Moving to cloud is not the giant leap some financial services firms might think it is; many are already using cloud apps as part of everyday operation without even realising. For instance, it is very common for marketing teams to use content delivery networks, which can be deemed a ‘cloud’ service.

The key is to incentivise the entire business to embrace cloud for both new and existing applications. Therefore it is important that operations, application owners and the business are all on the same page when it comes to establishing which applications should move to the cloud. In today’s competitive financial services environment, this really should be a question of agility rather than cost.

Map it out

Once everybody is on board, the focus of the business must now turn to making the move happen. This means identifying what applications are already in place, what form they take and whether or not they are capable of being migrated to a cloud environment.

Don’t forget that it will not be appropriate for everything to be moved to the cloud. Transaction processing, for example, may be one of the last things to move, if at all – the business case to move these applications from the mainframe would need to be compelling. In reality, within financial services organisations we see a 70/30 split between applications that could realistically move to the cloud and those that cannot. Financial services organisations need to set out a sensible, achievable roadmap for their cloud journey. This involves three key elements: setting up the right platform, migrating applications and integrating legacy assets.

It can typically take three to five years to move all necessary parts of the business across to cloud, so it’s important to have a comprehensive understanding of what to move, when to move and how to do it. Without that, financial services firms will struggle to make good on the promise of cloud.

Read more: Why financial firms are missing out by not embracing the cloud