Forefront Communications

Fintech Futures: How Failure to Embrace the Cloud Could be the End of Wall Street as We Know It

HPR

Written by Mazy Dar, CEO, OpenFin

If you work in the financial services industry, you’re forgiven if you’re suffering from a bit of cloud fatigue. The rise of cloud technology and its implications have been hot topics on Wall Street for years now, and rightly so – the benefits are immense and will inform the digital strategy of countless firms in the years to come.

What’s often overlooked is that for banks and buy-side firms, there are two sides to the cloud conversation. The first surrounds the platforms they develop in house, whether internal or customer-facing. The debate over whether to move these to the cloud gets a lot of attention from the C-suite, and just about every aspect of the decision generates a lot of discussion in professional circles, from cost savings to potential security issues.

It is the other side of the cloud conversation – the one surrounding applications sold to banks and buy-siders by third-party vendors – that often isn’t discussed. Many on the Street are aware of these cloud-based apps and see them as an important part of their firm’s future, but there doesn’t seem to be much urgency to adopt. They like to feel in control of the platforms they’re using, and after all, no one gets fired for saying no, at least according to the proverbial wisdom of Wall Street.

Unfortunately, those with this attitude are viewing the issue through a foggy lens. Instead of the wait-and-see approach popular among executives, it is paramount that banks and buy-side firms suspend their cloud anxiety and work more closely with the fintechs developing these game-changing platforms. Those that don’t act quickly could be missing their best chance to steel themselves for a future that looks radically different from the industry as it exists today.

Let’s go over a typical exchange between an overly cautious bank and a third-party vendor. The vendor offers a powerful cloud-based platform with the ability to uncover insights or streamline workflows, but in order to access these efficiencies, the bank must provide confidential customer data. To avoid putting this data on the cloud, an on-premises installation is requested. To the bank, this appears to be a sufficient compromise: the bank gets the powerful functionalities without having to move its data.

This mindset betrays a fundamental misunderstanding of how cloud technology providers operate. On-premises installations are more expensive than cloud deployments, and that necessitates time and resources from both firms that could be better spent on innovation. These providers stake their business models on the idea that they can pour vast resources into improving their products, and every dollar spent on outdated processes takes away from that value proposition. In other words, for these vendors, the cloud is not just a matter of client preference – it’s woven into their DNA.

And yet, there are banks out there that flat-out refuse to work with vendors who insist on a cloud deployment. While they may feel secure in their current position in the market, institutions with this attitude have everything to lose. Wall Street’s slow rate of cloud adoption is an utter disaster, and if incumbents don’t act swiftly to modernize their technology strategy, newcomers will rush to fill the gap.

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