Kris Sharma, Financial Services Sector Leader at Canonical, on why open source cloud is empowering the financial services sector in Britain
The fintech sector is booming in Britain, with investment hitting new highs of $37.3 billion in 2021 – a sevenfold increase on the previous year, according to statistics from KPMG. With cloud-native innovation everywhere, larger financial services companies are turning to cloud technology (in particular open source private cloud) to power their digital transformation efforts.
Cloud technologies assist the digitisation of customer journeys, not to mention powering innovation with emerging technologies such as AI and blockchain. Both start-ups and larger financial institutions are harnessing the collaborative energy of open source cloud to energise innovation (while at the same time driving down costs and strengthening security). The potential is massive; the open source market is set to grow 24% by 2025, according to a study from Research and Markets.
Globally, the Covid-19 crisis has accelerated digital transformation in the financial services sector, with on-demand customers demanding innovative services and experiences. For financial services, open source cloud technology will be key to meeting this demand. The next few years will be a critical time for market leaders in this sector, as they adapt to a rapidly transforming landscape. Cloud computing is no longer an exotic, cutting-edge technology; it is part of mainstream IT, making businesses more agile, cutting costs and offering access to potential new revenue streams.
In this environment, market leaders are integrating multiple cloud platforms to harness the business value of emerging technologies, which we have found ourselves as well. Research by Canonical has found that around 60% of financial services businesses expect to use multi-cloud (a mixture of on-premises and externally hosted infrastructure). The future looks bright for the country.
Why the UK?
Britain remains at the forefront of fintech innovation worldwide, with UK-based fintech companies attracting more funding than companies across the rest of EMEA combined, according to KPMG’s research. Payment technologies are key to this sector, which is why it saw the most investment in the country in 2021 compared to other innovations in the sector. But British fintech companies are also innovating across everything from wealth and asset management to cybersecurity.
For financial institutions in the UK, innovation is no longer an optional ‘nice to have’, as they are surrounded on all sides by young, agile companies pioneering the latest and greatest in financial technology. Instead, companies must embrace these new technologies and innovate internally to stay afloat in a market which is changing around them.
Why financial institutions are turning to open source
In this strong market, financial services companies face the challenge of keeping pace; and this is where open source technologies step in to assist. A hybrid or multi cloud set-up, based on open technologies, offers key advantages like flexibility. This allows financial services to quickly respond to innovation within the wider market, while still keeping pace with regulatory requirements. For financial services companies, agility tops the reason they are adopting cloud technology, with 47% citing it as a driver, according to a survey by 451 Research. Additionally, data privacy requirements and regulatory compliance mean that financial services companies have to think carefully about where customer data is stored and where applications are running – hence open source private cloud is a perfect choice for many fintech businesses.
Open source cloud technology will also be crucial for companies as they engage with emerging technologies, thanks to standardised platforms such as Kubernetes. Open source private cloud means that companies can be more daring in terms of embracing emerging technology; compared to legacy data centres, there’s a significantly lower total cost of ownership (TCO) over time. This allows financial services companies to experiment with technologies that will be central to the evolution of the sector, such as AI and blockchain (blockchain was highlighted as a key area of investment in the British market in KPMG’s report). Perhaps most crucially, open source private clouds can also scale at speed, offering financial institutions the chance to add extra cloud resources to meet demand as needed.
The next two to three years will be a crunch point for the financial services sector in the UK, with cloud platforms transforming existing IT infrastructure and enabling innovation. In the financial services sector, most organisations are transforming incrementally to a hybrid cloud model – and open source private clouds will be key to this transformation. The next few years will be critical for financial services companies, with a major shift to cloud platforms, not to mention a need to engage with new technologies.
In response, financial services businesses need to engage not just with open source cloud, emerging technologies and hybrid IT architectures, but all of them at the same time, in order to build a foundation to see them through a time of rapid change. Make no mistake, the companies that harness these technologies most successfully will be the ones who emerge triumphant, having captured new business opportunities powered by open source cloud technology.