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More profitable, more resilient, more cyber-secure
Cloud technology is becoming an essential tool in the banking and capital markets sector after proving its worth during the pandemic’s interruptions.
In PwC’s 2023 Cloud Business Survey, 95% of banking and capital markets respondents say they are now, or will be in two years, fully on the cloud.
Q: Which of the following best describes your company’s cloud maturity? Source: PwC 2023 Cloud Business Survey, January 2023: base: 144
We see with our clients that the pandemic opened many eyes to the wide range of possibilities with cloud. That could be as simple as mobile check deposits or as complex as responding to fast-moving geopolitical and cybersecurity events. And with new stresses recently appearing in bank funding and risk management, greater data transparency and operational flexibility may help leaders better manage an institution’s complex flow of funds.
Confident in digitization’s power to bring about a faster and more responsive organization, leaders are now looking to engineer the cloud into every part of the business.
“We’re seeing larger transformation and modernization efforts of big corporate platforms: financial systems, human capital systems, payment systems. Firms are constantly looking at how to change the technology fabric of the business.”
- Scott Evoy, Principal, banking and capital markets, PwCBut our survey also illustrates a wide gulf between banks. Adopting cloud or running parts of the business in the cloud is not the same as being a cloud-powered bank. What does cloud-powered mean?
The cloud-powered bank
Cloud-powered companies in our survey are the ones that moved to a digital operating model and are achieving measurable value across 12 cloud transformation metrics such as better decision-making, productivity, or cybersecurity.
Twelve percent of banking and capital market respondents in our survey merited being called cloud-powered because they are extracting ROI from the cloud at a pace that’s well ahead of their peers.
The enhanced ROI for cloud-powered companies may explain why they are more likely to predict stronger revenue growth versus their peers. Forty percent of cloud-powered companies, compared to 24% of the rest of the survey population, say they expect 15%+ revenue growth over the next 12 months.
The rosier projections may be because cloud-powered banking operations open new avenues for top-line growth, whether that’s in APIs and open banking, embedded loans or banking-as-a-service.
Additionally, a cloud-powered bank’s agile operations could quickly turn a front-line employee’s insight into a viable, revenue-generating product that’s in the market well before the competition.
“We haven’t always had the opportunity to think creatively in banking, and we haven’t always had the tools to make those ideas a reality. But now we have the tools and the ideas, and technology makes them possible.”
- Musi Qureshi, Principal, digital banking PwCWe believe that banks embracing digitally powered creativity are the main competitive threat to other institutions in the near-term, more so than fintechs or large consumer brands. (See Next in banking and capital markets 2023). For example, by using data and analytics to produce insightful advice tailored to each individual client, banks with enhanced digital capabilities can demonstrate to potential customers the benefits of switching institutions.
How to build a cloud-powered bank
How did cloud-powered banks become cloud-powered? Our survey provides insights into the decisions and changes that firms should consider if they want to achieve similar results.
The cornerstone of being cloud-powered is being all-in on cloud and using a cloud business model. In and of itself, the cloud is viewed as the competitive advantage.
However, migrating workloads to the cloud is not enough to achieve cloud-powered status.
Our survey indicates changes to corporate culture are likely to be part of the process of transformation.
The cloud-powered companies in our survey share four value-creation characteristics. They are the “how to” guide for achieving measurable value from digital transformation.
Source: PwC 2023 Cloud Business Survey, January 2023
Common pitfalls to realizing value from the cloud
Transformation is a complex initiative, and the survey’s findings highlight common difficulties we often hear from banking and capital markets clients.
The biggest barrier to achieving value? Challenges in using cloud service providers.
That may not be surprising as 69% of respondents use a hybrid cloud approach involving multiple providers, which adds complexity and operational risk.
The second- and third-ranked barriers are an inability to quantify ROI and budget/investment constraints.
Reframing the common pitfalls, what our survey finds is that banking and capital markets companies want cloud services and solutions to be easier to use, have a clearer investment payoff and to cost less to implement and maintain.
Industry cloud for banking’s growing role in transformation
Industry cloud for banking solutions are seeking to meet those three needs and many others.
Industry cloud for banking solutions gather together the regulatory and cyber compliant software, system integrations and coding that help speed up the completion of digital banking projects, in turn reducing costs.
In our survey, industry cloud for banking users say:
- Cyber security and privacy controls are better tailored to their operations than what they were using previously
- Pre-configured API integrations are boosting efficiency
- Richer data tools are enhancing operational and customer intelligence
- Ready-to-use computer architectures are a solid foundation for future growth
We believe industry cloud for banking will be a bigger part of banks’ go-to-cloud roadmap given its potential benefits for institutions of all sizes.
PwC's industry cloud for banking solution leverages the firm’s decades of sector experience and delivers, we believe, a banking-specific, flexible and agile platform that can serve the needs of a diverse set of clients. We believe a common cloud services platform can help clients get to market faster and more efficiently, with less risk and greater reliability and at a potentially lower cost compared to other approaches to the cloud. (See PwC’s industry cloud for banking offerings and alliances)
Transformation is in full swing
In conversations with clients, we sense increasing optimism about their ability to vigorously compete in a fully digital world; optimism that’s based on their use of cloud technology to address the pandemic’s challenges.
While it’s not clear what banking will look like in the years ahead, what we perceive is that the industry is regaining the competitive initiative by embracing the cloud and its related breakthroughs: scalable computing, big data analytics, complex modeling, disaster recovery, remote working and AI.
As more banking and capital markets companies make the operational, business model and technological changes to compliment a cloud transformation, the more likely it is that they’ll become cloud-powered companies, able to effectively compete in a vibrant marketplace.
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