Cloud-Based Financial Services: A Banker’s Guide

by James O'Neill, November 13, 2014
Industry Trends
Global, North America


Few technologies are as well known — and as frequently misunderstood — as cloud computing. By pooling the IT processing demands of many individual users, departments, and firms, cloud services providers are able to offer data center capacity virtually on demand and without limit, allowing banks of all sizes to enjoy economics that surpass those of the largest banks. More importantly, cloud services can offer banks increased agility to adapt product offerings to meet the evolving demands of customers.

Cloud services are not without their risks and limitations, and bank CIOs need to be thoughtful in what specific products and services are deployed via the cloud.

In the report Cloud-Based Financial Services: A Banker’s Guide, Celent studies the origins of cloud services and the technologies that have enabled cloud services to make such rapid inroads in many industries, including financial services. The report also studies the taxonomy of cloud services and its many forms, reviews the key benefits, limitations, and risks of cloud computing for financial service providers, and reviews some promising implementation strategies.

This report is the first in a series aimed at developing insight into the cloud services industry while separating hype from fact, and future reports will examine specific use cases, identify success stories to distill best practices in implementing cloud-based banking systems, and spotlight vendors that are most active and best positioned to assist banks with their cloud services projects.

One inhibiting factor is the lack of common understanding regarding what vendor solutions truly are cloud services, versus those that represent traditional web services. Some banks, influenced by certain vendors, understand cloud services to encompass all types of existing Software as a Service (SaaS) models. However, cloud-based SaaS has little in common with older web services and ASP offerings.

“Today’s bank CIOs are torn between the promise of significant operational and financial benefit offered by adopting cloud-based banking solutions, and a visceral concern over risks of data privacy and security introduced by cloud services,” says James O’Neill, a senior analyst with Celent’s Banking practice and author of the report. “However, in light of the fact that the well-publicized data breaches at Target, Home Depot, and JP Morgan Chase all took place in highly secured private data centers, a nuanced view of data security suggests that data security is less about the location where data is stored and more about the way in which data is protected and secured.”

Celent is a research and advisory firm dedicated to helping financial institutions formulate comprehensive business and technology strategies. Celent publishes reports identifying trends and best practices in financial services technology and conducts consulting engagements for financial institutions looking to use technology to enhance existing business processes or launch new business strategies. With a team of internationally based analysts, Celent is uniquely positioned to offer strategic advice and market insights on a global basis. Celent is a member of the Oliver Wyman Group, which is a wholly-owned operating unit of Marsh & McLennan Companies [NYSE: MMC].

Media Contacts

North America
Michele Pace
Tel: +1 212 345 1366

Europe (London)
Chris Williams
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Asia (Tokyo)
Yumi Nagaoka
Tel.: +81 3 3500 3023

Table of Contents

Executive Summary




Overview of Cloud Computing


Behind the Curtain: Enabling Technologies


Cloud Computing Models: A Taxonomy


Benefits for Financial Institutions


Limitations and Risks


Implementation Strategies


What’s Next


Leveraging Celent’s Expertise



Support for Financial Institutions



Support for Vendors


Related Celent Research


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