If you’re in charge of IT for a Canadian financial institution, and cloud-based applications aren’t on your 2015 agenda, get ready for a competitive smackdown.
More than half of all new applications launched by banks and credit unions next year will be cloud-first, according to IDC’s recent 2015 forecast for financial institutions.
Scott Lundtrom admits that cloud adoption has been “slow out of the gate,” in financial services, but he expects that to change significantly next year as retail banks become laser-focused on improving customer service and leveraging data stores.
“It’s driven by the adoption of mobile, social and big data,” said Lundtrom, group vice-president for IDC. “There is a rising tide where cloud is now seen as the connective tissue to put the power of analytics in the hands of customers and managers.”
A lot has changed in just a couple of years. In a July 2013, PriceWaterhouseCoopers LLP reported that more than two-thirds of financial services respondents said they would invest more in cloud-based technologies this year compared with only 18 percent the year before, according to a June article by Forbes magazine.
In IDC’s strategy meetings with banks, the discussion has moved beyond whether or not to adopt cloud-based apps. Financial institutions are exploring how to deploy various cloud options – public, private, hybrid – to improve customer service, increase productivity and maintain competitive advantage.
“Private cloud is gaining traction in the institution,” noted Lundtrom. “It capitalizes on the engineering and benefits of cloud without the risks of hybrid environments. More banks will join in to financial industry clouds and community clouds with their own customers.”
Beyond the cloud, technology leaders in banks have identified two key investment areas in 2015:
Video banking: One in five financial institutions worldwide will launch a video banking project in the next 24 months as a means of extending the hours and resources of the branch. Delivered through Voice over IP, video banking’s biggest selling point is its ability to replicate person-to-person interaction without inconveniencing the customer, said Andrei Charniauski, IDC research manager.
“Video can be delivered over mobile, ATM or within the branch,” said Charniauski. “It can support reduction of branches without losing touch with existing customers.”
Branch transformation. Banks and credit unions will increase 2015 investments in branch transformation by five to 10 percent over 2014. But the retail branch of yesterday won’t cut it, warned IDC. Banks need to evolve to meet the changing needs of customers.
Mobility also figures prominently in branch transformation as banks consider technologies such as geo-location services that identify when a customer is close to the branch and can be notified to finalize a pending transaction.
Although the Internet of Things is still in its infancy, IDC advises that financial institutions take note of technologies such as wearables and drive-up authentication to understand how they will ultimately impact customer interaction and retention.
“Customer experience is all about interaction with bank employees,” said Marc DeCastro, IDC research director, “and making sure the customer’s experience – whether that’s in branch, ATM vestibule or digital – is tailored to that individual’s preferences and is a pleasant experience.”
Image via Death to the Stock Photo