Implementing cloud at scale is critical to harvest the full value of AI investments, according to first-of-its-kind research revealed by the Capgemini Research Institute.
Capgemini’s inaugural World Cloud Report – Financial Services shows that 91% of banks and insurance companies have now initiated their cloud journey: a significant increase from 2020 when only 37% of firms had embarked on their cloud transformations.
Today, 89% of financial services executives believe that a cloud-enabled platform is crucial for delivering the agility, flexibility, innovation, and productivity necessary to meet escalating business demands. Yet, most firms are still not cloud-native and instead tend to opt for a ‘lift and shift’ approach that hinders the full benefits of cloud-based systems’ scalability and flexibility advantages.
Cloud at scale critical to harvesting the full value of AI investments
According to Capgemini, nearly two-in-three financial services firms (62%) have started using AI, with a target to utilise it across the full value chain in the next two years. But despite the technology’s potential, AI is yet to be used at scale in the financial services industry. To date, the research found that much of the cloud investments have been applied towards modern, user-friendly, AI-based, customer-facing applications. Fewer investments are made in back-end core processing systems that are providing inputs to consumer-facing front end applications, resulting in a poor overall user experience.
According to the report, the migration of internal core systems to suitable cloud-enabled ecosystems and platforms is critical to unlock the complete potential and efficiency of AI and generative AI. In return, this will spark the emergence of a wider range of business growth opportunities over the coming years. Today, in banking and insurance, firms are testing their generative AI use cases across customer onboarding, credit analysis, financial planning, policy renewals and to support client servicing models.
Cloud plays a pivotal role in driving ESG impact
With 95% of firms now factoring ESG impact into all key investment decisions, the cloud also has a pivotal role to play in aiding the industry’s effective management of ESG reporting to help achieve their sustainability goals. It can equip them with essential ESG impact measurement tools, as seen by 51% of financial services firms citing improved transparency and reporting measures. Cloud providers are starting to develop solutions that can track and report scope 1, 2 and 3 level emissions, offering comprehensive visibility into a firm’s carbon footprint across business functions and products.
“For today’s financial services organisation, ignoring the cloud is simply not an option. Moving to the cloud requires looking beyond a cost-savings approach and being centred around driving innovation to gain a competitive edge,” said Ravi Khokhar, Global Head of Cloud for Financial Services at Capgemini. “As companies race to adapt and implement generative AI, they need to be mindful that there will be no future AI benefits to be realised without cloud-enabled systems. By defining and establishing an effective cloud target operating model at scale, the full potential of these transformational new technologies can be harnessed.”
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