# Bringing financial services into the fast lane
Author:  Pal Sinha, Barnali 
Author URL: https://financedigest.com/author/pal-sinha-barnali
Published: 2019-03-28
Category: FINANCE
Category URL: https://financedigest.com/category/finance
Meta Title: Financial Services Sector Cloud Migration
Meta Description: Discover how technology has disrupted the financial services industry, the challenges faced by legacy systems, and the importance of cloud migration for
Tags: featured
Tag URLs: featured (https://financedigest.com/tag/featured)
URL: https://financedigest.com/bringing-financial-services-into-the-fast-lanehtml

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_By **Tom Holliday**, Financial Services Consultant at_ [_KCOM_](http://www.kcom.com/)

Perhaps no other sector has been more visibly disrupted by technology than financial services. Banks, brokers and insurance companies were caught off-guard by data-driven start-ups and app-enabled payments providers. To survive, they have been racing to catch up ever since. However, laden with a backlog of legacy technology, the [digital transformation of the financial services](https://www.financedigest.com/the-future-for-financial-services-is-digital-engagement.html "The future for financial services is digital engagement") industry is stuck in second gear.

The sector’s slowness in adopting new technologies has seriously damaged financial firms’ ability to meet their customers’ needs, as a [recent Forrester study](https://www.gbgplc.com/newsroom/forrester/) shows. Forrester found that 84% of UK financial service organisations are [concerned about their ability to identify customers](https://www.financedigest.com/natwest-limits-customers-crypto-transfers-citing-scam-concerns.html "NatWest limits customers’ crypto transfers, citing scam concerns") correctly, while a third believe they are ‘seriously lagging behind competitors’ when it comes to fraud checks. Meanwhile, the researchers found that UK firms have less interest in [adopting new approaches to authenticate customer](https://www.financedigest.com/strong-customer-authentication-must-be-adopted-to-make-open-banking-a-success.html "Strong Customer Authentication must be adopted to make open banking a Success") identity, lagging behind China, Singapore and the US.

**Reach for the cloud**

It’s not all bad news, though. In autumn 2018 KCOM conducted in-depth research among senior decision makers at businesses in a number of sectors, including financial [services](https://www.financedigest.com/integrated-finance-the-advantages-of-using-financial-infrastructure-as-a-service.html "Integrated Finance: the advantages of using financial-infrastructure-as-a-service"), to gauge their progress towards cloud migration. We found that 80% of respondents from financial [services businesses say they plan to invest in cloud migration](https://www.financedigest.com/financial-services-industry-blazes-the-trail-for-cloud-migration-post-pandemic.html "Financial services industry blazes the trail for cloud migration post-pandemic") in next 12 months to drive innovation – the highest of any sector studied.

The cloud is central to any significant business [transformation project and enables financial services companies](https://www.financedigest.com/why-financial-services-companies-should-consider-rfps-in-their-digital-transformation-strategies.html "Why financial services companies should consider RFPs in their digital transformation strategies") to throw off the shackles of legacy technology. But cloud migration is always a serious undertaking, and particularly so for financial [services businesses](https://www.financedigest.com/philanthropy-is-an-underrated-tool-for-growing-financial-services-businesses.html "Philanthropy Is an Underrated Tool for Growing Financial Services Businesses").

A poorly-planned and executed [cloud migration may simply achieve](https://www.financedigest.com/the-journey-to-cloud-native-overcoming-hurdles-to-drive-modernisation-and-achieve-long-term-success.html "The journey to cloud-native: overcoming hurdles to drive modernisation and achieve long-term success") the continuation of a flawed system. This year we saw the huge risks of a failed migration, with a [traditional bank](https://www.financedigest.com/how-partnerships-between-fintech-start-ups-and-traditional-banks-herald-a-brave-new-world-of-opportunity.html "How partnerships between FinTech start-ups and traditional banks herald a brave new world of opportunity") suffering severe reputational damage. When a [big technology project goes wrong in a large financial services business](https://www.financedigest.com/how-china-became-big-business-for-twitter-from-blocking-to-blue-checks.html "How China became big business for Twitter, from blocking to blue checks"), it tends to make the front page. Just look at the reams of negative publicity that TSB garnered when the [bank ran into problems updating its IT infrastructure](https://www.financedigest.com/are-banks-destined-to-merely-become-infrastructure-providers-in-the-banking-industry-of-the-future.html "Are banks destined to merely become infrastructure providers in the banking industry of the future?"). Do [bank customers](https://www.financedigest.com/uk-banks-told-to-reimburse-customers-tricked-by-scams.html "UK banks told to reimburse customers tricked by scams") face a year of more of uncertainty and disruption, while challengers steam ahead with their superior tech agility and ability?

[**Crossing the rubicon**](https://www.financedigest.com/crossing-the-rubicon-why-cross-border-payments-are-primed-for-transformation.html "Crossing the Rubicon: Why Cross-Border Payments Are Primed for Transformation ")

No industry takes its customers’ [security more seriously than financial services](https://www.financedigest.com/facilitating-open-finance-through-secure-services.html "Facilitating open finance through secure services"), and our research suggests that respondents are fully aware of the potential risks of cloud migration. When choosing a [technology partner](https://www.financedigest.com/how-to-choose-the-perfect-it-and-technology-partner.html "How to Choose the Perfect IT and Technology Partner"), they were most likely to use selection criteria that are heavily weighted towards partners that they can trust, as measured through their delivery on previous projects.

Almost two in five respondents (38%) from financial services [businesses](https://www.financedigest.com/government-assisted-financing-schemes-for-small-businesses.html "Government Assisted Financing Schemes For Small Businesses") use this criterion – more than those who choose a partner based on their ability to deliver against a defined technology road map (34%), and those that use agile methodologies, frameworks and contracts that enable the delivery team to work through the unknowns (28%).

This is understandable. Trust is especially vital in the financial [services industry](https://www.financedigest.com/hybrid-working-a-risk-or-opportunity-for-the-financial-services-industry-2.html "Hybrid working: a risk or opportunity for the financial services industry?"), as we’ve seen. Yet is such caution always the best way to [develop systems and infrastructure that will support a financial services business’](https://www.financedigest.com/covid-19-makes-the-case-for-technology-and-automation-for-business-development-in-professional-services.html "Covid-19 Makes the Case for Technology and Automation for Business Development in Professional Services") success in the years to come? If financial services providers truly trust their technology partners, shouldn’t they be more [open to accepting](https://www.financedigest.com/why-ev-charging-stations-need-to-accept-open-cashless-payments.html "Why EV Charging Stations Need to Accept Open Cashless Payments ") their advice on innovation and cloud migration projects, rather than expecting them merely to follow the strict instructions in the proposal?

Our [research suggests](https://www.financedigest.com/new-research-suggests-over-13-million-brits-were-inadequately-managed-while-working-remotely-2.html "NEW RESEARCH SUGGESTS OVER 13 MILLION BRITS WERE INADEQUATELY MANAGED WHILE WORKING REMOTELY*") that this remains a barrier that the financial sector is still unwilling to cross. We found that only 10% of respondents expect their partners to introduce ideas and help [drive innovation](https://www.financedigest.com/tectonic-innovation-to-drive-the-spearmint-oil-market.html "Tectonic Innovation To Drive The Spearmint Oil Market"), compared to 36% who identify the required technology first and then issue an RFP.

[**Digital collaboration**](https://www.financedigest.com/smart-becomes-the-first-ssp-to-collaborate-with-white-bullet-to-safeguard-quality-in-the-digital-media-landscape.html "Smart becomes the first SSP to collaborate with White Bullet to safeguard quality in the digital media landscape")

While financial services was a little [ahead of other industries](https://www.financedigest.com/keeping-ahead-of-network-challenges-in-the-finance-industry.html "Keeping ahead of network challenges in the finance industry") in being open to ideas from their technology partners, this 10% figure is hardly evidence of a “pioneer spirit”. Given the pressure from [challenger banks](https://www.financedigest.com/the-rise-of-challenger-banks.html "challenger banks"), we would expect the industry to be more open to listening to technology experts.

We fully accept why financial services firms would approach [digital transformation](https://www.financedigest.com/open-finance-the-next-step-for-global-digital-transformation.html "Open finance – the next step for global digital transformation") projects, including cloud migration, with caution – but can they afford to spurn the advice of their technology partners? For example, a trusted partner might advise that financial [services businesses would do better to focus on cloud-native innovation](https://www.financedigest.com/accelerating-financial-services-innovation-with-the-promise-of-data-mesh.html "Accelerating financial services innovation with the promise of data mesh ") and a more measured, gradual migration to cloud, rather than doing it in a “big bang”.

We don’t believe that the go-it-alone approach [works](https://www.financedigest.com/making-sure-you-are-compliant-when-working-in-the-finance-industry.html "Making Sure You Are Compliant When Working in the Finance Industry") for financial services businesses. Earlier this year, for example, we found that only 6 per cent of UK financial [businesses know](https://www.financedigest.com/what-you-need-to-know-about-tax-savings-for-businesses-in-las-vegas-nv.html "What You Need to Know About Tax Savings for Businesses in Las Vegas NV") when all their infrastructure components will reach their end-of-life-date.

[Digital transformation](https://www.financedigest.com/critical-learnings-in-digital-transformation.html "Critical learnings in digital transformation ") should be a collaborative work. The required skills are in [short supply](https://www.financedigest.com/no-poop-for-you-manure-supplies-run-short-as-fertilizer-prices-soar.html "No poop for you: Manure supplies run short as fertilizer prices soar"), so firms should be willing to look further afield for the expertise they need, bringing in expert partners to assist with the change. The race to the [cloud was won years ago by a generation](https://www.financedigest.com/french-cloud-provider-ovh-lines-up-diesel-generators-to-offset-potential-power-cuts.html "French cloud provider OVH lines up diesel generators to offset potential power cuts") of agile digital upstarts, but more established players have much to gain from finishing second. Collaboration with expert consultants is the key to [success in the new digital world](https://www.financedigest.com/impact-com-releases-the-partnership-economy-a-new-book-that-guides-businesses-to-success-in-a-digital-world.html "impact.com releases The Partnership Economy, a new book that guides businesses to success in a digital world").


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