The cloud model of the financial industry is gaining momentum

Pressure is growing for specialized cloud offerings that meet customer demands as industries digitally transform. The financial services vertical offers a striking example.

IBM Cloud for Financial Services is one of the financial industry’s specialized clouds developed to meet security and compliance regulatory requirements.

The global financial cloud market is expected to reach $90.11 billion by 2030, growing at a compound annual growth rate of 12.4% from 2021 to 2030, according to Allied Market Research. Financial clouds offer software functionality to manage a company’s finances. These can include tools for preparing budgets, sending invoices, accounting for all expenses, approving purchase requests and managing payments.

IBM’s financial industry cloud

In the case of the IBM cloud for financial services, IBM ensures that software vendors certified to run on their financial services cloud have complied with all local regulations required for the industry, said Jerry Silva, vice president of IDC. FinancialInsights. IBM also offers security services to offload some of the work institutions need to do in cloud-based software acquisitions from a third party, he said.

jerry silva

“This is part of the due diligence that the institution would otherwise have to do on its own before approving an external software vendor,” Silva said.

IBM started offering its financial services cloud three or four years ago with Bank of America as its first customer, said Prakash Pattni, general manager of digital transformation, IBM Cloud for Financial Services.

“Instead of financial organizations spending their time building all the security [components], we said, “Why not…build an industrial cloud that meets these regulations and security requirements,” Pattni said. This way, organizations can focus on innovation.

IBM’s financial services industry cloud has two layers, starting with the base layer, which includes built-in security and automated compliance tasks. The company has experts who continually review local regulations and incorporate controls to meet them, Pattni said. The second layer is built around data protection, using what IBM calls confidential computing, which offers a high level of encryption, he said.

Reduce cloud risk

IBM’s main goal in building the vertical-specific cloud was to reduce the risk – to reduce the risk – of using the multi-cloud ecosystem for financial services enterprise customers who need the lowest levels. higher levels of security, privacy and resilience. The company has often heard of financial services organizations using third parties and ending up with “a massive supply chain of vendors and malicious actors exploiting the vulnerabilities of these small vendors. We wanted to reduce the risk of this ecosystem to their industry,” Pattni said.

IBM also recognized that the financial services industry is moving to a hybrid cloud model, with organizations using a mix of on-premises infrastructure and external vendors, “so we wanted to make our solution as open as possible with security and safety.” , Pattni said. “Many of our solutions can be run on other [cloud] suppliers and in [a customer’s] own data center.

Prakash Pattni, Managing Director, Digital Transformation, IBM Cloud for Financial ServicesPrakash Pattni

The partner ecosystem

IBM Cloud for Financial Services works with more than 100 partners who help customers in the financial services industry accelerate their cloud adoption and digital transformation initiatives. These partners have been approved by IBM and help customers build applications and solutions for use on this foundational layer, Pattni said.

For example, a retail bank that needs to perform customer identity verifications might use a vendor that is a payment or identity specialist to automate the process in the cloud rather than the bank verifying customers themselves. , Pattni said. Combining these foundational and data protection layers enables faster time to market and saves a customer’s internal developers from having to reinvent the wheel.

Before IBM adds a particular vendor to its partner network, the company assesses the vendor and runs them through tests to ensure that the vendor has the appropriate levels of security, encryption, and security controls, a said Pattni. These tests can prove to a regulatory body that the supplier meets certain standards.

The benefit to a customer, such as Bank of America, is that if they are running an application on IBM’s financial services cloud, IBM has already done the work to customize and build the industrial cloud.

Additionally, when customers deploy applications with different cloud providers, they can monitor them through a single window. “We’re building open solutions for the hybrid world. Even if it works in your own data center, you can monitor all these different rooms in all these different environments from the solutions we’ve built,” Pattni said.

To do this, IBM used features such as Red Hat’s OpenShift Kubernetes container platform designed for an open hybrid cloud strategy, he said.

Some MSPs use the financial services cloud to build an application to solve a customer’s specific problem, Pattni added.

Financial services clouds will have a positive impact on institutions that may hesitate between adopting a cloud now or waiting until [they have] the internal resources needed to adopt cloud-based workloads.

jerry silvaVice President of Research, IDC Financial Insights

The future of industry-specific clouds

Industry-specific clouds facilitate cloud adoption, especially in regulated industries, by reducing regulatory hurdles that hamper the IT landscape and application modernization, Pattni said. In contrast, users of general-purpose clouds should customize them to meet the needs of their industry.

Companies are adopting hybrid and multi-cloud approaches that create different challenges on how to integrate all the services needed to manage operations, he noted. The goal is to accelerate the return on investment while reducing the time and cost of compliance.

Financial services clouds can reduce supply chain risks and reduce compliance costs for fintechs and partners by inherently adhering to the same security and control requirements.

“Ultimately, banks can access a much wider range of relevant and compelling new financial technologies faster and easier than before,” Pattni said.

Silva believes that “financial services clouds will have a positive impact on institutions that may hesitate between adopting a cloud now or waiting until [they have] the internal resources needed to adopt cloud-based workloads.”

Overall, adoption has grown rapidly in financial services, with less than 10% of institutions not already running or planning to run on the cloud within 24 months, Silva said.

“If anything, I think cloud service providers that build a financial services-specific cloud can have a competitive advantage over those that don’t,” Silva said, but added that he’s still too early to say for sure. “There are other characteristics, such as deep expertise in AI-based analytics, that may prove more compelling than a financial services-specific cloud, depending on the specific needs of each individual institution. »

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