The financial services industry is evolving at a rapid pace, with shifting consumer expectations, new technologies, and developing regulatory requirements. Financial services firms need the right technology to help them stay agile and prepare for the future. 

The cloud is a key point of leverage for firms looking to improve performance across a broad range of activities. Moving to the public cloud can advance operational resiliency, improve staff productivity, increase regulatory compliance and enhance business model innovation. 

However, there are a number of financial services companies that are still hesitant in their cloud journeys. The barriers to adoption vary, from the complexity of legacy systems, to trust and skills gaps, regulatory uncertainty, and fragmentation of compliance requirements. Although many companies have embraced the benefits of cloud technology, more robust cloud adoption—especially around core back-office functions—will require additional facilitation, including through regulatory harmonization and streamlining.

A new comprehensive study on cloud adoption in financial services

To better understand the challenges and opportunities of cloud adoption in financial services Google Cloud, together with the Harris Poll, surveyed more than 1,300 leaders from the financial services industry across the United States, Canada, France, Germany, United Kingdom, Hong Kong, Japan, Singapore and Australia. 

There were five noteworthy takeaways from the study:  

1. A vast majority of financial services companies are already using some form of public cloud. A large number of surveyed financial services companies (83%) report they are deploying cloud technology as part of their primary computing infrastructures. Of those using cloud technology, the most popular architecture of choice is hybrid cloud (38%), followed by single cloud (28%), and multicloud (17%). Notably, of respondents without a multicloud deployment, 88% reported they are considering adopting a multicloud strategy in the next 12 months.

2. Financial services institutions in North America are leading in cloud adoption. Of the financial services companies who are implementing a cloud strategy, the highest levels of cloud workload adoption were reported in North America, with institutions in the U.S. (54%) and Canada (52%) leading the way. The lowest level of cloud adoption was reported in Japan (42%).

3. As financial services companies continue to use the cloud, more core functionalities can and will be migrated. While many financial services companies have migrated substantial workloads to the cloud, the industry is far from full adoption when it comes to core, back-office workloads. Of financial services companies currently using a majority cloud strategy in the United States, for example, only half (54%) of their workloads are fully deployed in the cloud. Data and IT security (74%), regulatory reporting (57%), and fraud detection and prevention (57%) rank among the highest workload adoption. Core underwriting activity (40%) and data reconciliation (48%) ranked lowest. Across Europe, cloud usage for core activities like underwriting also scored low with the UK listing only 30% adoption.

4. Among respondents, there is a very strong positive perception of the potential for cloud technology to assist in business operations and regulatory compliance. Nearly all respondents (>88%) agreed that cloud adoption can:

1. help adapt to changing customer behaviors and expectations,  
2. enhance operational resilience, 
3. support the creation of innovative new products and services, 
4. enhance financial services institutions’ data security capabilities, and 
5. better connect siloed legacy software infrastructure within financial services institutions. 

5. Certain regulator-induced challenges, including the complexity of sectorial compliance frameworks and fragmentation, create hurdles to cloud adoption for financial services companies. While 88% of respondents had a positive view of current regulatory efforts to provide guidance and clarity for cloud implementation, the results showed that more needs to be done to facilitate adoption. Most respondents (84%) agree that regulatory reviews and approvals take too long because of regulatory fragmentation across regulatory bodies. And 78% say that regulatory uncertainty over the use of public cloud prevents their organizations from adopting cloud technologies that would otherwise provide benefit to them. Additionally, a third of all on-premises respondents (38%) say that the large investment of resources for the regulatory approval process is a reason why they’re not using cloud services.

“While many banks have already deployed hybrid cloud environments, others are still in various stages of planning and deploying,” said Jerry Silva, research vice president for IDC Financial Insights. “Clearly, hybrid infrastructure is a reality, and financial institutions must focus not only on leveraging the modern infrastructure model to gain efficiencies, resilience and agility, but also on taking the necessary steps to manage such environments, including the security and compliance of cloud services.”

Future recommendations for financial services regulators

Financial services firms should continue to maximize the potential of technology by migrating more core workloads to the cloud, and actively considering multicloud and hybrid-cloud strategies. Such strategies enhance resiliency of existing IT infrastructure and reduce concerns over vendor lock-in. 

The research also points to steps that regulators could take to provide additional clarity and guidance, such as aligning regulatory reviews across agencies to avoid fragmentation; developing regulatory “safe harbors” for cloud adopters based on adherence to accepted standards and best practices; training regulatory staff on emerging tech; and advancing data reporting requirements via cloud and related technologies.

In the past few years, many regulators across the globe have taken a robust approach to rationalizing rules and guidance to cloud adoption in the financial sector, which has helped significantly stimulate adoption. But further assurances and harmonization of best practices around supervision is needed to advance risk-based and secure digital innovation.  

At Google Cloud, we’re committed to working with financial services customers and regulators to provide them with controls and assurances on risk management, data locality, transparency, and compliance. We are constantly engaging with regulators to share information, respond to their considerations and concerns, and address questions in the interest of transparency and building trust. 

To learn more about these findings and more, download our infographic and our full report. 

^{Research methodology}

^{The survey was conducted online by the Harris Poll on behalf of Google Cloud, from December 7, 2020, to January 4, 2021, among 1,363 senior executives in France (n=113), Germany (n=178), the UK (n=192), Hong Kong (n=99), Indonesia (n=100), Japan (n=142), Singapore (n=71), Australia (n=134), Canada (134), and the United States (n=200) who are employed full-time, part-time, or self-employed whose main functional role is in risk/compliance or IT at a company in the banking, finance, or financial services industry with a title of director level or higher. The data in each country were weighted by the number of employees to bring them into line with actual company size proportions in the population. A global post-weight was applied to ensure equal weight of each country in the global total.}

The ability to quickly introduce and evolve payment options for products or services is essential for businesses, as nearly 50% of consumers who can’t use a preferred payment method abandon their purchase. At the same time, gift cards, branded credit cards and rewards programs are critical tools that companies rely on to build more loyal and lasting customer relationships. With Highnote, companies have an all-in-one embedded platform to quickly create payment cards and wallets, offer innovative rewards programs and credit, and provide sustainable wage access. It is the first platform that allows enterprises to make card issuance an embedded capability of their product without creating an entirely new (and costly) organization.

Creating an exciting fintech future with Google Cloud

When thinking about building the industry’s first end-to-end embedded finance platform, we quickly realized Highnote would only be successful if it enabled companies to truly innovate and quickly roll out new programs. To do so, the platform would have to be built on scalable infrastructure capable of securely delivering services with speed and reliability while offering easy access to actionable Big Data analytics.

Working closely with the team at the Google for Startups Cloud Program, we successfully implemented Google Cloud as a versatile, future-proof foundation of our platform—and built Highnote from the ground up in just one year. Highnote’s GraphQL-based API platform reinvents the card issuance process. Utilizing the developer-friendly Highnote platform, product and engineering teams at digital enterprises of all sizes can easily and efficiently embed virtual and physical payment cards (commercial and consumer prepaid, debit, credit, and charge), ledger, and wallet capabilities into their existing products. This creates compelling value while growing revenue and building a unique and differentiated brand.

We leverage Cloud Spanner, BigQuery, and Google Kubernetes Engine (GKE) to create a unified and highly secure PCI DSS-compliant platform with GraphQL APIs that provide rapid and flexible money transfers. This gives us a reliable platform to deliver and test customer experiences, respond to outcomes, and make better business decisions. Powered by Google Cloud, our data models and application domains are architected to support configurations and customizations that unlock a diverse set of new use cases across industries, including retail, travel, logistics, healthcare, and sustainable wage access programs.

We are especially proud to highlight our enablement of sustainable wage access, as this program helps the 50% of Americans living paycheck to paycheck. Embedding this program within payroll systems provides a viable alternative to payday lenders who often charge exorbitant fees and interest rates. In real world terms, this means Highnote helps people access earned wages before payday at no cost.

The other customer we just went live with was Tillful, and their Tillful card helps small businesses build their business credit. This program will help new and emerging businesses as well as underrepresented owners of small businesses by making the credit ecosystem accessible. Highnote’s platform is designed to support multiple use cases across many industries. For example, we also help the trucking and logistics companies to develop fleet and fuel cards, and spend management companies who are looking to uplevel offerings.

Delivering high-performance transactions with Cloud Spanner

Building one of the world’s most modern card platforms would not have been possible without Cloud Spanner. We needed a solution that would keep our massive petabyte databases from buckling and more securely deliver data anywhere in the U.S. Cloud Spanner does all this and more, as it routinely connects purchases from millions of customers to tens of thousands of vendors. We also wanted to reduce overhead by 80% by eliminating manual sharding, partitioning, and optimization of data. These processes are automatic with Cloud Spanner so we can operate at maximum efficiency.

We specifically selected Cloud Spanner as our distributed SQL database management and storage solution because of its outstanding availability, zero plan maintenance downtime, security certifications, and the highest consistency guarantees of any scale-out database. We continue to optimally scale without any downtime or compromises to the integrity or security of our data. This is key for us because we can address unexpected spikes, long-term growth, and new services without costly rearchitecting.

Highnote is designed to perform over billions of transactions on Cloud Spanner, and the average latency of less than 250 ms is a testament to the robustness of Google Cloud services.

Enabling actionable customer insights at scale

BigQuery is another key Google Cloud solution that we rely on to deliver deep insights and visibility for our customers on a highly secure and scalable platform. When building Highnote, we knew we needed a cost-effective solution that excelled at data analytics. This is particularly critical for accurately measuring the performance—whether profitability or efficacy—of any program or card.

Using BigQuery, we successfully run analytics at scale with as much as a 34% lower three-year TCO than cloud data warehouse alternatives. Over the past year, BigQuery has enabled our customers to unlock data-rich capabilities with a ledger that tracks money in real time and serves up complete debit and credit entries for every event across their accounts. Companies also access real time balances for revenue, fees, customer accounts, and available funds management without complicated spreadsheets.

To quickly and efficiently roll out Highnote to our customers, we needed a simple way to automatically deploy, scale, and manage Kubernetes. When selecting a Kubernetes management tool, our top priorities were rapidly spinning up and securely scaling across multiple sites. As part of Google Cloud’s expansive ecosystem, Google Kubernetes Engine (GKE) was the top choice due to seamless and automatic Kubernetes scaling and management.

We quickly got off the ground with single-click clusters and scaled up by using the high-availability control plane—including multi-zonal and regional clusters—to easily accommodate multiple active-active regions (which other solutions cannot do). As an embedded finance platform, stringent security protocols were obviously a key consideration for us. GKE is secure by default and runs routine vulnerability scans of container images and data encryption. Further security assistance was provided by Google Cloud partners 66degrees and DoiT International to help us rapidly validate VPC PCI compliance and ensure the uninterrupted performance of thousands of transactions per second.

Winning in fintech with Google for Startups

Building the industry’s first end-to-end embedded finance platform would have been extremely challenging without the extensive Google Cloud support. By working closely with our Startups team and Google partners, we had access to Google Cloud services to more easily validate VPC PCI compliance and address most issues before we exited stealth. Their responsiveness is incredible and stands out compared to support services we’ve seen from other technology providers.

Our participation in the Google for Startups Cloud program has been instrumental to our success. With Google Cloud, we are making embedded payments accessible to our customers without a big budget price tag. By doing so, we help unleash the creativity of emerging enterprises by enabling them to innovate with payment services and rewards programs to reach new markets and customers. If companies can dream, we can enable them to realize it on Highnote. Our platform really is that flexible. We’re excited where we can go and grow with Google Cloud.

If you want to learn more about how Google Cloud can help your startup, visit our page here to get more information about our program, and sign up for our communications to get a look at our community activities, digital events, special offers, and more.

As a Google Cloud customer, your carbon footprint is already carbon neutral: Google first achieved carbon neutrality in 2007, and has been purchasing enough solar and wind energy to match 100% of its global electricity consumption since 2017. Now, Google is targeting a new sustainability goal: operating on carbon-free energy (CFE) 24/7, everywhere, by 2030. 

We want to empower you to make more sustainable decisions and progress with us towards this 24/7 carbon-free future. Earlier this year, we published the carbon characteristics of our Google Cloud regions. Later, we introduced a simple tool to help you pick a Google Cloud region, taking variables like price, latency and sustainability into account. Our next question was: what’s the best way to surface that sustainability info when you’re actually picking a region for your cloud resources? 

Starting today, we are indicating regions with the lowest carbon impact inside Cloud Console location selectors. Available today for Cloud Run and Datastream, you’ll see it roll out to more Google Cloud offerings over time:

Regions that feature the “Lowest CO2” and the leaf have a CFE% of at least 75%, or, if the information is not available for this region yet, a grid carbon intensity of maximum 200 gCO2eq/kWh. You can read more about how we calculate these metrics in our documentation.

Before releasing this feature, we ran experiments to measure its impact: Users who were exposed to the enhanced region picker were 19% more likely to select a “low carbon” region for their Cloud Run service—a significant lift. These results show that by displaying carbon information in context of when you make the decision of picking a region, we are helping you make more sustainable decisions.

By sharing and displaying carbon information of Google Cloud regions, together we’re making tangible progress towards our goal of a carbon-free future. Learn more about Carbon free energy for Google Cloud regions.