Fintech Insights

Cloud: The way for Asian capital market firms to stay competitive

Tara Winters | Global Head of Capital Markets Managed Services, FIS

February 08, 2021

The COVID-19 pandemic has been the ultimate test of resilience for capital markets firms around the world. It has led to a number of fresh challenges for the industry, from the sudden need to deploy systems and tools to help traders to do their jobs remotely, to the radical spikes and fluctuations in trading volumes caused by market volatility.

As businesses have attempted to cope and facilitate fast, informed and profitable trading decisions in this post-COVID-19 world, their legacy infrastructure, fragmented data silos, and manual processes have proved to be outdated and have held them back.

Although capital markets firms in Asia have already been on the right path with transformation programs that are currently in place, they have been too slow to keep pace with the level of change caused by the pandemic. COVID-19 has proven to be the alarm that the industry in this region needed to move forward as it looks to grow in the “next normal.”

In Asia specifically, this next normal looks set to be coming in the form of managed services. According to FIS’s latest global Pulse Readiness 2.0 survey, the reliance on managed services has grown in importance during the pandemic, with almost half of the leaders surveyed highlighting cloud adoption as crucial for competing in the post-COVID-19 environment.

Why have capital market firms in Asia procrastinated cloud adoption till now?

Cloud is a versatile technology which provides infrastructure, platforms and software to users. It can be set up for exclusive use by a single organization, or as an open resource for multiple organizations in a public cloud. The benefits of cloud are endless, but its adoption by capital markets firms has been slow.

There have been several roadblocks to this adoption within the capital markets business. Many businesses have been wary of the cloud, with concerns over security, compliance, and privacy, while the adoption of cloud at scale has proved challenging for established banks, due to their legacy IT architectures and the need for significant long-term commitment.

In addition to these obstacles, businesses in Asia also have the added responsibility of navigating differing sets of regulations across the region and adhering to country-specific requirements. Quite often this can prove to be challenging, so it requires firms to work with local partners who thoroughly understand what the regulators’ concerns are and who are well-versed in helping businesses address these requirements.

Now the pandemic has generated fresh challenges, such as the sudden need to enable the majority of employees to work remotely, while exacerbating bigger issues, such as the growing capital expenditure pressures and negative interest rates. The solution to these challenges has been available for some time, but many companies have been hesitant to act. Furthermore, the pandemic exposed vulnerabilities in existing operations and technology.

Now, they simply can’t wait any longer. Firms that invest in managed services and advanced technology are in a stronger position to adapt to change – but only if they act now.

Cloud and managed services coming to the forefront

FIS’s latest global Pulse Readiness survey has found moving to the cloud and outsourcing the management of commoditized processes is on the rise. 46 percent of respondents globally cite the greater use of managed services and cloud as a priority for adapting and competing in the post-COVID-19 environment.

Capital markets firms are changing how they plan to operate for the long-term, as they realize the critical importance of having flexible operating models. The risks of in-house technology and infrastructure have been highlighted in the pandemic, so improving managed services and cloud are now more important to financial institutions than objectives such as expanding into new geographies. This is demonstrated by the fact that as overseas expansion plans have receded in importance by 11 percent, (falling from the top of the agenda in June to the bottom in September), cloud and managed services adoption is gaining traction in the industry.

Why cloud?

Cloud can be the catalyst for several general business priorities too. It’s efficient, meaning companies can “lease” resources rather than purchasing expensive hardware that is not always required. The cloud also provides the ability to automatically scale to whatever level of support is needed, which proved increasingly useful with the shift to remote working caused by the pandemic.

Along with being cost effective and eliminating capital expenditure on infrastructure and hardware, focusing efforts on cloud and managed services is also a very secure move. Technology risks are now in the hands of the dedicated managed cloud service provider, who provide access to the most up-to-date and powerful technology – automatically.

Cloud services are also able to maintain an uptime of 99.9 percent, and you can access the applications anywhere at any time. They also provide greater reach, allowing firms to deliver services in regions where they are required.

Additionally, businesses with compliance challenges, restricted security protocols, and a need to maintain data in the local region, would in fact work well within a private cloud environment as it is designed to meet the data and regulatory requirements of organizations.

In Asia, cloud is now becoming the most popular managed service, as it allows new businesses to get up and running faster, enables firms to bring new products to market more efficiently and provides a path that helps international companies expand in the region. Another reason for cloud adoption in the region is its predictable budget cycle and the ability to pay only for the capacity being utilized.

The time for cloud is now

As the capital markets industry across Asia comes to grips with the pandemic’s long-term repercussions, the need to accelerate modernization priorities and shift to cloud and managed services is becoming increasingly apparent. Firms need to be prepared for the unexpected and technology can help ensure maximum resilience and efficiency, with cloud allowing them to scale up in volatile, high-volume conditions or scale back as extreme conditions subside.

COVID-19 has changed global capital markets forever. It’s increasingly apparent that moving to cloud and outsourcing the management of commoditized processes are no longer just viable options – they are now integral for future success.

This article was originally published in EJ Insight.