Accenture identified regulatory reporting as one of the top three legacy tech intensive processes that could benefit from cloud migration, with 40% of respondents citing it as the leading use-case
According to 2017 research by advisory firm Gartner, 36% of banking and insurance providers worldwide are poised to “use the cloud to support more than half of their transactional systems of record” this year. This is in part because, leveraging cloud services, one Asia-Pacific bank reported a 40% drop in costs associated with IT infrastructure and software development and provisioning.
From the regulator’s point of view, cloud is set to help them process and evaluate the rising amount of data they themselves received from their reporting entities. For example, in a 2019 interview with the Financial Times, Steve Randich, chief information officer at the U.S. Financial Industry Regulatory Authority (FINRA), said migrating to the cloud enabled the regulator “to process 50,000 “nodes”, or pieces of data, simultaneously, up from their peak capacity of 3,000 nodes a day back in the pre-cloud era of 2003.”
Despite the financial industry’s sky-high aspirations, “reality often lags behind their ambitions,” writes the FT. In fact, Accenture found that 43% of survey participants had no cloud strategy or had just barely started adopting basic cloud processes. Meanwhile, 63% of those surveyed said they had no road map to measure their progress.
Furthermore, the cost and time-horizon of cloud transformations are intensive to say the least. McKinsey research found that a single financial institution had budgeted US $300 million for a migration process forecasted to span two-to-three years.
But the bigger problem is one of so-called “technical debt,” which Accenture defines as the “cost to rework legacy IT so that the business thrives in the digital age.” The limitations and overall lack of interoperability that are inherent to legacy systems are significant stumbling blocks to cloud adoption.
Regardless, the Accenture report identified regulatory reporting as one of the top-three, legacy-tech-intensive processes that could benefit from cloud migration, with 40% of respondents citing it as the leading use-case.
And in a 2019 interview with Finextra, Mike Zehetmayr, the head of RegTech for consultancy Ernst & Young in the UK, said “use of cloud computing, or utilities, would provide opportunity for FIs to use cutting-edge technology to manage compliance while driving down the costs related to purchasing, installing and managing the solution, including upskilling or even recruiting the resources with the relevant competence.”
Ultimately, Zehetmayr believes the cloud will be key for FIs to disintegrate legacy siloed infrastructures and create a fluid, interoperable compliance ecosystem in financial services. However, overcoming the technical debt remains a daunting and costly enterprise. To this end, modern application program interfaces (APIs) may offer FIs the most frictionless and cost-efficient way of connecting legacy systems to cloud applications.