Australia’s financial institutions have only moved relatively slowly towards a future of digital transformation that encompasses cloud solutions. As a result, it has limited their ability to take advantage of the ever-growing number of applications and other micro services (hence additional flexibility and scalability) that cloud offers.
Research shows that if Australian organisations, including finance sector businesses, need to remain competitive, they will need all or most of their IT infrastructure on the cloud by 2025. Gartner estimates that over 95% of new digital workloads must be deployed on cloud-native platforms by then.
The recent history of Australia’s financial sector is split into three eras – Pre-Pandemic, Pandemic, and Post-Pandemic. In broader terms, the pre-pandemic era had Australian financial institutions focused on modernizing mainframes, creating private clouds, and experimenting with unproductive workloads on public clouds. During the pandemic, with the acceleration of remote working, as workers and customers could not visit physical branches, financial institutions leveraged public cloud-enabled applications such as video conferencing.
However, they were still reluctant to shift from on-prem IT infrastructure to cloud-native solutions. Financial institutions have always been cautious about sending their customers’ financial data off-premises in light of cyberattacks and third-party vulnerabilities.
Australian financial institutions can leverage various benefits of the cloud
The more focused benefits identified by major banks so far have hinted toward cost and development times. While they hold significance, the exponential benefits of the cloud run much deeper than this.
Cloud technology accelerates business operations, delivering faster insight from data, decreased development time for applications and updates, and optimal disaster recovery plans, allowing major banks to focus more on customer experience.
Cloud is also a paradigm shift in the development and deployment of technology solutions to fulfill business demands, facilitating the development of new business models. The major benefits for Australian financial institutions include standardising processes and data across many business units and agility from reduced development time.
While a cloud-native approach is crucial for financial institutions, there are barriers to utilising the full potential of cloud technology. To overcome these limitations, organisations must develop new business strategies that align with their cloud management strategies and overcome the skills gap with adequate training and dedicated resources. Without specialist knowledge, employees cannot utilise resources at optimal capacity and deploy cloud initiatives. Instead, this gap can significantly extend timelines, impact business operations, and increase costs associated with cloud adoption.
Cyber Security in the Critical National Infrastructure Sector is vital
Australia is a regular target with the increasing sophistication and frequency of cyberattacks. These threats disrupt essential services, impacting business continuity and enabling access to sensitive information, which weakens our competitive advantage, and risks compromising national security.
The Australian Cyber Security Centre (ACSC) reports over 67,500 cybercrime attacks in the financial year 2020-21, an increase of 13% from the previous financial year. A quarter of these attacks targeted Australia’s critical infrastructure organisations, including essential services such as health, education, communications, electricity, water, and transport. To bring these numbers into perspective, it implied that a critical infrastructure faced a cyber attack every 32 minutes.
These organisations have also reported total losses of over $33 billion in light of cyberattacks, with medium-sized businesses reporting the highest average losses.
The increase in online banking has created a new customer base for financial institutions. With an economical distribution of $171 billion, and 96 banks operating in Australia, there was an annual growth of 4.3% in the financial year 2020-21.
With over 197,000 bank employees and 120,000 insurance and superannuation funds sector employees, there must be adequate training for all employees to leverage cloud services at optimal capacity.
The Australian Government’s recent amendments to the Security of Critical Infrastructure Act 2018 specifically aims to enhance the framework that maximises the security and resilience of Australian Critical Industries (CNI), including financial institutions.
Australian financial institutions are taking steps toward cloud adoption and other initiatives
Major financial institutions (banks and insurance companies) in Australia have a revenue of over $15 million with over 30,000 employees. Some banks include Cyber Security teams responsible for all critical cyber-control activities, with Crisis Management Teams to improve the bank’s response capability during vulnerable cyber attacks.
Australian financial institutions also focus on staff education and training to increase awareness of the dangers of cyber attacks.
As a part of their initiative toward adopting better technology solutions, somefinancial institutions have started to focus on migrating their workloads to the public cloud, while others have invested in cloud-based financial crime data solutions to accurately identify and report issues. In addition, Machine Learning with anti-money laundering allows organisations to identify hidden financial crime activity and other cyber threats.
The rapid migration to public cloud services has been the leading initiative in most Australian financial institutions adopting a multi-cloud strategy. Hybrid working practices, supported by a shift to cloud-based solutions has increased capacity, providing remote access to users and driving increased collaboration .
Fast-tracking digital capabilities for a better customer and partner experience has led to developing machine learning models, maximising productivity, and deploying endpoint security solutions.
With the acceleration of digital transformation, organisations must innovate, or they risk losing out to early adopters. Organisations that aren’t taking advantage of cloud applications to reduce significant IT costs, deliver exceptional customer experience, develop new products, and provide faster provisioning, risk being outranked by other cloud-native organisations.
And all organisations, irrespective of the industry, dragging the chain of cloud migration, continue to deny themselves access to innovation, on-demand scalability, improved data protection, substantial savings, and new-wave technology.
With the rise in cloud adoption, financial institutions are pressured to accelerate cloud migration
Arguably, Australian financial institutions face increased pressure to accelerate their ‘effective’ digital transformation, including adoption of secure cloud services, as a result of requirements of the amended Critical Infrastructure Act. The Financial Services sector, like 12 other sectors, have been identified as critical infrastructure sectors, that are obliged to ensure the security of their data and have, clear cyber risk mitigation strategies and reporting arrangements in place. Failure to appropriately manage a cyber risk scenario resulting in a breach can both trigger the right of Government to ‘step in’ to manage the threat/incident and expose Board members to potential personal penalty.
Financial institutions require limitless scalability, agility, increased productivity, and efficient disaster recovery plans that ensure business continuity with minimised downtime. With cloud adoption, organisations can leverage these benefits and shift their organisational workloads and sensitive data to a more efficient and virtual cloud environment and overcome limitations with physical infrastructure.
Understanding the benefits of cloud adoption for Australian financial institutions
Cloud shifts the organisational focus from operational requirements to innovation with the advancement of technology. It debunks traditional business models and technology solutions, allowing organisations to build differentiation on top of standardised solutions.
Well-designed and integrated cloud solutions can significantly reduce manual work with increased automation. It also shifts effort from utility roles to more productive and efficient roles, requiring organisations to adjust their resource pools. All cloud capabilities must integrate and operate in an end-to-end organisational architecture and operating model.
The transformation of the business model to align with the paradigm shift of the cloud also requires employees to have adequate digital skills and cyber security awareness. Any inconsistent application of new technology, with limited education and access, can fracture the IT ecosystem and put service delivery, business operations, and customer service at risk while endangering sensitive data.
Cloud technology offers organisations an opportunity to deliver efficient, faster, and more personalised value to their customers to ensure business continuity. Financial services organisations in Australia must prepare strategically to respond to fluctuating business demands and implement significant business changes. Cloud technology enables organizations to more quickly align their business operations and technology strategies with their organisational goals to deliver customer centric solutions. With increased collaboration and trained employees, organisations can optimise their limited resources and leverage the benefits of the cloud – more quickly and more effectively.
