Hybrid Cloud

Why Banks Are Relying on Hybrid Cloud

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Today, disruption, change, and competition are the new paradigm for banks. Not only are financial institutions being squeezed by growing costs and continued margin pressure, agile FinTechs are driving an imperative for banks to become more open and agile in order to offer more compelling services to clients.

To address this, banks are moving at lightning speed to find new ways to become more flexible, adapt to new markets and tap into pools of innovation across the fintech ecosystems to expand their reach and streamline their digital strategies.

Cloud is how they are getting there.

Cloud has become mainstream in banking, and most banks are searching for the optimal mix of traditional IT, public and private clouds. However, high performing banks are counting on an enterprise-wide hybrid cloud strategy to stay on top.

With hybrid cloud, banks have the flexibility and benefits of both private and public cloud while addressing data security, governance and compliance.

Banks such as WestPac, BBVA, and ING Group are all using this model as the foundation for their business.

An IBM Institute for Business Value report “Tailoring Hybrid Cloud for Banking,” found a number of benefits from banks who have already implemented the hybrid cloud, including:

Reduced costs 
Hybrid cloud helps banks manage costs with greater flexibility by facilitating a switch from fixed to variable expenses. This shift allows banks to focus on funding business initiatives rather than tying up investment in under-utilized capital equipment.

Improved operational efficiency
Hybrid cloud enables banks to quickly provision resources across an entire enterprise, thus enabling them to provide solutions for business problems faster. This can greatly reduce time spent on problem solving while enhancing the agility of banks in response to constantly shifting market demands. In Canada, one of the country’s largest banks is at the forefront of payments innovation in the Canadian marketplace. Hybrid cloud is helping accelerate go-to-market for these new initiatives.

Boost innovation
Cloud adoption fosters innovation because it can transcend barriers of geography, industry, and organization. Remarkably, at least 75 percent of bankers surveyed said their most successful cloud initiatives had already achieved expansion into new industries, creation of new revenue streams, and expansion of their product/services portfolio.

For example, Banco Santander is using hybrid cloud as a platform for its ecosystem of partners. Santander’s Fintech ecosystem, through its seed fund, InnoVentures, hosts hybrid cloud services with successful Fintech startups, such as PayKey, Kabbage, Tradeshift and blockchain startup Elliptic. Likewise, ICICI Bank of India is using hybrid cloud to streamline business processes and build an ecosystem of Fintechs.

Cloud adoption is certainly maturing, and high performing banks are already achieving significant successes through hybrid cloud adoption. What’s most important is that banks get it right.

Banks need the right flexible cloud model ideally suited to their workloads, whether that means moving some data to the cloud or leaving the more sensitive data on premise.

Either way, to gain the economic, strategic and financial benefits the hybrid cloud affords, its footprint must be holistic across an organization. For more findings on how hybrid cloud can address a bank’s unique needs, read the full report.

Research Director & Global Cloud Leader, IBM Institute for Business Value

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