-
Majority of banks and insurers struggle to maximize the value from
their cloud investments
-
Less than 40% of financial services executives say they are highly satisfied with their cloud outcomes
-
Most banks and insurers adopt cloud solutions with the primary objective to drive operational efficiency (84%)
-
Protecting customer data and maintaining privacy is a challenge for the industry
The Capgemini Research Institute’s World Cloud Report for Financial Services 2025, published today, reveals a clear divide between how traditional and new-age financial institutions view their cloud technology investments. Most banks and insurers adopt cloud solutions with the primary business objective to drive operational efficiency (84%), while fintechs and insurtechs are pursuing cloud to accelerate sales (62%). The analysis further suggests only 12% of financial services organizations can be considered ‘cloud innovators’2.
Financial institutions are facing a challenging environment, ranging from data collection and management inefficiencies, cybersecurity gaps, regulatory complexities, to evolving customer expectations. According to the report banks and insurers are increasingly turning to cloud solutions to mitigate these risks. This is evident in a 26% increase in the mention of cloud-related terms in the annual reports of the top 40 tier-one banking and insurance firms globally between 2020 and 2023.
Read More: Global Fintech Series Interview with Jeff Marsden, Chief Product Officer at PureFacts
Roadblocks to realizing value
However, firms face roadblocks in maximizing cloud value as operational challenges continue to influence C-level decision-makers, slowing down the return on cloud transformation initiatives and investment. Fewer than 40% of executives say they are highly satisfied with their cloud solution’s outcomes broadly, including its ability to provide reduced operational costs (33%), enhanced scalability (27%), accelerated innovation (26%), advanced data and analytics (24%), and improved security and compliance (21%).
The report highlights that challenges arise due to financial institutions taking a lift-and-shift approach to cloud migration, rapid scaling that produces higher-than-anticipated costs, complicated pricing models, and inefficient governance and management practices.
“Cloud adoption should be viewed as the start of a transformative journey that fuels long-term business growth, rather than the end game or destination. What’s clear from our research is that while the technology is seen by financial institutions as a building block, some firms still consider cloud a cost-saving measure, whereas innovative disruptors leverage it to redefine their operations,” said Ravi Khokhar, Global Head of Cloud for Financial Services at Capgemini. “By taking a cloud native approach to foster a culture of innovation, banks and insurers will be better placed to deliver new products and services, enter new markets, and increase customer satisfaction. With generative AI now top of the boardroom agenda, a cloud-based technology foundation can also help the industry maximize investment in new technologies at scale.”
Financial institutions face a complex operational landscape
Banks and insurers hold a wealth of personal, financial, and transactional data about their customers. However, they face multiple challenges handling this data and keeping it secure. According to the report, three main concerns were highlighted by the majority of industry executives:
- Legacy systems impeding siloed data integration (71%)
- Protection of customer data and difficulty in maintaining privacy (70%)
- Lackluster data quality, including incorrect and missing information (69%)
With Europe’s Digital Operational Resilience Act (DORA) set to take effect in January 2025, and mounting regulatory pressures worldwide, financial institutions will soon face even more stringent compliance requirements, particularly over the increased use of technology platforms and third parties. The Consumer Financial Protection Bureau’s recent ruling on open banking, known as Section 1033 of the Dodd-Frank Act3, reinforces the importance of cloud-native solutions to provide the necessary scale, keep the cost of data exchange low for the industry, and remain compliant. Increased data, security, and regulatory constraints will mean organizations will have to work harder to derive meaningful insights and prioritize innovation.
The report further highlights that 81% of executives find the lack of appropriate technology impedes their business goals. Most respondents consider artificial intelligence (81%), predictive analytics (75%), and robotic process automation (65%), crucial for supporting a cloud ecosystem. However, traditional financial institutions currently fall short in the maturity and skills needed for these technologies: 15% display capability maturity in AI, 30% show capability maturity in predictive analytics, and 22% exhibit capability maturity in robotic process automation.
The industry must encourage an innovation-driven, cloud-native culture
Based on the research, 12% of banks and insurers can be classified as cloud innovators who leverage a well-defined cloud vision supported by scalable platforms and mature ecosystems to generate superior top-line results. This strategy is reaping significant rewards:
- 32% of innovators exceed upsell and cross-sell targets compared to 12% of their counterparts
- 32% exceed data monetization targets versus 10% of other banks and insurers
- 22% exceed innovative product development targets compared to 10% of financial institutions
To accelerate operational efficiency and innovation, the report suggests banks and insurers must apply a data-driven, cloud-focused approach. This requires an attention toward creating applications natively for the cloud, investing in cloud-skilled professionals, building a culture that encourages the sharing of ideas and best practices, and democratize access to technology for all teams.
Read More: AP Automation Adoption: The Productivity Paradox
[To share your insights with us, please write to psen@itechseries.com ]
