The financial services industry is understandably risk-averse. And when it comes to technology, it has relied on the same trusted security methods for many years.

The cloud has proved an ongoing point of resistance, with widespread concern around its viability for the banking sector. There has also been much uncertainty regarding the regulatory and supervisory frameworks for cloud outsourcing and the scrutiny banks might face should data be compromised.

However, the past few months have signified mammoth disruption for the financial sector, and attitudes toward the cloud are slowly changing.

The arrival of the European Union’s Payments Services Directive (PSD2), which enables bank customers, both consumers and businesses, to use third-party providers to manage their finances, has been a game changer, driving forward interest and confidence in the cloud. The Open Banking Standard, which requires that customer banking data can be shared through secure open APIs, is also expected to be fully implemented by 2019. The final recommendations from the European Banking Authority (EBA) on outsourcing to cloud service providers have applied since July. It’s the first time that cloud outsourcing has been the subject of formal European supervision.

Combined, these initiatives fundamentally change the payments value chain. Banks have little choice but to evolve and prepare to be more competitive and are beginning to see the unique opportunities the cloud offers.

Banks of All Sizes Are Moving to the Cloud

Recently, several banks have announced their cloud intentions. This seems to be having a domino effect.

Capital One is a heavy, long-time user of Amazon Web Services (AWS). As CIO Rob Alexander explains: “The ability to provision infrastructure on the fly is huge for our productivity and speed to market,” he said at AWS’ re:Invent developer show.

And it’s not just challenger banks but also global, systematically important financial institutions, or G-SIFIs, which are making way for the cloud. UBS, for example, moved its risk management platform to Microsoft Azure cloud technology, in April 2017. Additionally, when the Financial Conduct Authority (FCA) released guidelines for off-premises cloud services, it revealed it was already using AWS, which, in a sense, gave the go-ahead for other financial institutions.

As customer expectations change rapidly, banking mobility is becoming increasingly important to customers who want to access banking information on the go, 24/7. This is creating the need for banks to compete against FinTechs and third-party payment providers. Monzo, one of the most prominent UK-based challenger banks, was founded in 2015 and is a fully regulated bank built entirely on the AWS cloud, on which it runs more than 400 core-banking microservices. With a mobile-app-first approach to customer interaction, it has already handled £1 billion worth of transactions for half a million customers in the UK.

Hybrid Cloud Approach Enables Banks to Transform at Their Own Pace

As we move toward the final stages of 2018, banks are seeing that a customer-centric approach is crucial, and cloud presents an attractive option for remaining flexible and competitive. However, a move to the cloud takes time, and for G-SIFIs, there will be much legacy data, systems and applications to unbundle before a full public cloud strategy is achievable.

A hybrid cloud approach arguably offers the financial sector the ability to take a flexible and phased approach to cloud computing, transforming the business at their own pace. Fundamentally it means banks can choose the best location for their workloads. A hybrid cloud could be used initially for low risk workloads and for small acquisitions, while highly regulated workloads could remain on premises and in specific geographies depending on regulatory requirements.

Banks need to ask themselves, are they ready to move to the cloud? And do they have the necessary skills to do so? After all, cloud is no longer an “if” but a “when” decision.

Learn how Citrix Cloud is enabling financial institutions to adopt the hybrid cloud at their own pace.