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The financial services sector is gearing up for a significant transformation as cloud technologies take centre stage in driving innovation and ensuring regulatory compliance. According to a recent study by the London Stock Exchange Group (LSEG), the adoption of cloud technologies is becoming a key business imperative for many firms.
The research reveals that 87% of surveyed financial services firms have increased their spending on cloud technologies over the past two years, with a focus on strategic outcomes such as scalability, revenue growth, and AI enablement rather than cost reduction. This shift is evident in the growing trend of multi-cloud or hybrid-cloud strategies, with 82% of firms now employing such approaches for flexibility and risk diversification.
Artificial Intelligence (AI) and Machine Learning (ML) are expected to be pivotal in driving innovation over the next three years. The study indicates that 91% of firms are currently using or planning to use cloud for AI-related initiatives within the next 12 months. These technologies are anticipated to revolutionise areas like fraud detection, risk management, data analytics, and generative AI.
Despite the challenges posed by regulatory frameworks such as the EU’s Digital Operational Resilience Act (DORA) and General Data Protection Regulation (GDPR), firms are adapting their cloud strategies to meet these standards. 84% of respondents have had to adjust their strategies to comply with these regulations, underscoring the importance of cloud strategies that are flexible and compliant.
The implications of these trends are far-reaching. The increased use of cloud technologies enhances financial services firms' ability to adapt quickly to changing market conditions and maintain robust operational resilience. The widespread use of AI and ML applications indicates a shift towards a more technologically driven financial sector, where these technologies will play key roles in risk management and data analysis.
Looking ahead, firms are re-evaluating their preferred cloud service models, indicating a potential move towards more custom-built, in-house applications (PaaS and IaaS). Of those using cloud for risk management, 83% have completed migration, the highest among all identified use cases. Despite the shift, 61% still report reduced IT infrastructure costs, especially in EMEA and APAC.
Stuart Brown, Group Head of Data & Feeds at LSEG, stated, "Adopting cloud is a key business imperative for financial services firms." The research also highlights that 92% consider operational resilience a critical or very important factor when selecting a cloud provider.
More than half (54%) of the respondents have completed cloud migration and are realizing benefits, particularly in areas such as risk management, customer engagement, and enterprise-wide data access. The study also reveals that 84% of respondents described their firms as somewhat or very advanced in AI adoption, with investment firms leading this trend.
However, concerns around sophisticated cyberattacks (47%) and data privacy and breaches (46%) remain high. As the financial sector continues to embrace cloud technologies, ensuring robust security measures will be crucial.
In conclusion, the adoption of cloud technologies by financial services firms is a significant trend that is set to shape the future of the industry. The strategic benefits, including scalability, revenue growth, and AI enablement, are driving this shift, while regulatory compliance remains a key consideration. As firms continue to adapt to these changes, they are poised to reap the benefits of increased innovation, operational resilience, and competitiveness.
In light of the increasing adoption of cloud technologies in the financial services sector, 91% of firms are either currently using or planning to use cloud for AI-related initiatives within the next year, indicating a growing focus on artificial intelligence and machine learning. Simultaneously, 84% of firms have had to adjust their cloud strategies to comply with regulatory frameworks, highlighting the importance of flexible and compliant cloud strategies in business.
