Fintechs and the cloud: Ensuring investments don’t add to current cloud challenges
Increased investment in cloud is slated to be a top priority for Irish fintechs over the next year, with half of these organisations being driven by a desire to improve scalability and reliability, while 43% want to increase agility, research from InterSystems has discovered. However, despite the many benefits cloud can offer fintechs and their customers, it isn’t without its challenges. This is something that the 40% of Irish fintechs who cite cloud support or multi-cloud deployment and administration as a top technical challenge can attest.
Therefore, with fintechs set to prioritise investment in cloud within the next 12 months, how can they ensure both they and their customers get the most from the technology and avoid it becoming another challenge to tackle?
The appeal of cloud
Firstly, it’s important to understand why fintechs appear to be so keen to adopt cloud, despite the challenges they confess to experiencing.
One of the main reasons for cloud’s popularity is that it enables agility, with fintechs able to use cloud without a large investment in IT staff or infrastructure. There are also a significant number of cloud services available, which allows fintechs to focus on their application and differentiation, rather than on keeping their infrastructure running, and realise faster time-to-value.
Additionally, cloud offers a range of capex vs opex benefits. For instance, cloud allows fintechs to quickly run proof of concepts and tests with minimum investment and less waiting time than with other types of infrastructure. It is also highly (and easily) scalable, which means that fintechs can scale both in and out as demand dictates, allowing them to lower costs and focus on building their solutions.
Before fintechs can realise these benefits, they must first overcome their current struggles with cloud and cloud support in order to turn it to their advantage.
Unlocking the benefits of cloud
Often, the root of these challenges is a lack of knowledge and expertise internally, particularly with regards to security, cost-management, data-locality, and the integration of various services. This is because the cloud is sophisticated and complex. In fact, it requires a specific set of skills to develop for the cloud, manage that technology, and keep it safe and secure. As such, increasing knowledge and training on cloud and cloud support is crucial so fintechs can deal with the cloud’s intricate nature.
While this responsibility lies with the fintechs themselves, on a broader scale, cloud technology vendors have a part to play in improving the use of cloud services within financial services. Vendors can do this by making more specialist fintech solutions available to the industry so that security and services integration come fully automated in a customer experience that is superlative, instead of frustrating and time consuming.
Fintechs would benefit from working with technology vendors to capitalise on the skills and technologies vendors possess to make more effective use of cloud and expand their current offering. For instance, many modern data management platforms now have the capability to be used in SaaS/multi-cloud environments, with the technology built into their applications and solutions from the ground up. Adopting these types of solutions would make it easier for fintechs to use data management technology, while supporting multiple deployment environments, including hybrid and multi-cloud.
Currently only 17% of Irish fintechs are in the position to offer a hybrid (cloud and on-premise) application, however, this is an avenue that more fintechs should explore, particularly as the vast majority want to collaborate with traditional banks. This is owing to the fact many traditional banks tend to have inflexible IT architectures and concerns about the security of cloud solutions, and are therefore unlikely to be in a position to adopt applications that are fully in the cloud. As such, a hybrid offering, supported by the right technology, along with service decoupling in bounded contexts, clear end-points contracts, standardization, and domain-driven-design will help fintechs to ensure their offering is more appealing to incumbent banks.
Additionally, this approach would allow fintechs to take some of the burden of adopting cloud off traditional financial services institutions, many of which are hesitant to adopt the technology themselves owing to security and regulatory concerns, as well as the complexity of integrating it with their existing legacy technology. In this regard, fintechs have a clear advantage, due to not being tied by the same constraints as traditional firms and essentially starting from a blank page when it comes to the technology they are able to implement.
Realising the true value of cloud
As fintechs embark on cloud investments, it is evident that there is a wealth of benefits and opportunities ready to unlock, they just need to ensure they take the right approach to avoid adding to the challenges they are currently experiencing.
This should include watching the costs and complexities of these investments. After all, as the fintech grows in the cloud and adds other components to gain the functionality they require, the costs and complexity will grow in tandem. Further complexities can also be prevented by implementing a cloud strategy to identify the right cloud provider for their needs and ensuring that the cloud doesn’t become another data silo by adopting cloud agnostic platforms which avoid vendor lock-in.
Finally, plan for failure. Having a tried and tested business continuity plan will ensure fintechs are prepared for every eventually and if the worst happens are able to minimise the impact on their business and customers.
Taking on board these considerations, as well as working with the right technology partners, will ensure that both fintechs and their enterprise customers are able to benefit from the scale and agility that cloud offers, and ensure their cloud investments provide real value.
Redmond O’Leary is sales manager for Ireland at InterSystems
Join InterSstems at the next TechLeaders roundtable on 10 March at the Ivy in Dublin to discuss the challenges facing fintechs and the financial services sector. To find out more click here
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