Industry Clouds in Banking and Capital – Part II
Data security and regulatory concerns are top-of-mind for B&CM executives considering Industry Cloud adoption. Banks must meticulously assess the risks against the benefits:
Risks and Regulatory Considerations
Data security and regulatory concerns are top-of-mind for B&CM executives considering Industry Cloud adoption. Most notably, 41% express unease about control over data and insights. Vendor lock-in also emerges as a significant challenge, with central banks and Industry watchdogs globally expressing concerns about concentration risks.
Industry Clouds may exacerbate these risks as they consolidate end-to-end processes for specific business issues under one vendor. Nevertheless, IndustryClouds technically support interoperability between different Cloud platforms, aligning with banks’ multi-Cloud strategies and mitigating vendor lock-in risks. However, banks must meticulously assess these risks against the benefits and compare them to generic Cloud solutions.
An Evolving Landscape
The landscape of Industry Cloud providers is evolving, with key players including hyperscale Cloud providers, enterprise software providers, core banking software providers, emerging SaaS providers, and system integrators. These players are adopting varied approaches to Industry Cloud strategies, capabilities, and co-development models.
Hyperscale Cloud providers view IndustryClouds as a strategic shift, bundling existing products and customising advanced features through an Industry-specific lens. Google leverages advanced technologies to extract data from traditional applications like CRM to address Industry-specific challenges. AWS focuses on bolstering sector expertise through strategic hires and partnerships. IBM has launched a Cloud tailored for financial services.
Enterprise software providers are creating Industry-specific customisations on top of existing horizontal applications. SAP’s IndustryCloud, integral to S/4HANA, is a growth driver for the company. Salesforce is experiencing significant adoption of IndustryClouds, while its acquisition of Vlocity enhances its Industry-specific workflows.
Core banking software providers are transitioning to open architecture and “Cloud-like” operating models, offering as-a-service solutions, elastic infrastructure, and new billing models. For example, Fiserv acquired Finxact, a Cloud-native core banking software provider, enabling third-party integrations through open APIs. Core providers also partner with hyperscale Cloud providers to expand their offerings.
Emerging SaaS providers have mixed views on IndustryClouds. Some consider themselves IndustryClouds from inception, while others hope that IndustryClouds will shift the conversation away from Industry-agnostic products. Their deep sector specialisation positions them to build capabilities faster than other providers.
System integrators are actively entering this space, combining sector expertise with technology acumen. The Industry Cloud ecosystem thrives on partnerships, with vendors from different categories collaborating to develop Industry Cloud solutions, creating monetisation opportunities for all.
Exploring Industry Cloud Use Cases for Banking and Capital Markets
Industry Clouds offer a wealth of disruptive use cases across various B&CM segments. Key Bank employs IndustryClouds for loan origination, while HSBC developed a risk advisory tool that runs complex simulations 16 times faster than before. Goldman Sachs established a transaction banking-as-a-service platform with AWS.
Sample use cases for Industry Cloud adoption across the retail banking deposits value chain include:
- Automated Savings: Sweeping spare change into investment accounts using AI/ML technologies and APIs.
- Multiposition Deposit Account: Combining savings, transaction, and credit positions in a single account, using analytics, AI/ML, and APIs to move funds.
- Digital Account Opening: Streamlining the account opening process.
- On-Demand Subscription Services: Providing subscription-based services.
- AI-Enabled Overdraft Protection: Leveraging AI for overdraft protection.
Selecting the right Industry Cloud solution can be a complex endeavour. Industry Clouds may come with a higher cost due to their specialisation. There is also a broad spectrum of solutions available, some focused on regulatory compliance, others on specific data and tools, and still others on analytical and AI capabilities.
Banks must accelerate their digital transformation efforts to remain competitive. Industry Clouds offer a potent solution by unifying technologies, streamlining innovation, and enabling access to a broader ecosystem of FinTechs and software vendors. Industry Clouds empower banks with robust innovation capabilities and hold the potential to redefine the future of digital transformation within the Industry.
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