Cloud adoption within financial services is anticipated to grow strongly in 2023 and the following years. However, this growth will bring new challenges, and VNG Cloud anticipates an influx of initiatives from both industry and government that will drive cloud adoption even further.

Based on the trends of the past few years, we can expect more surprises in 2023. If you are a financial institution or have close ties to the industry, here are the top five cloud trends to watch out for that will shape the financial services sector in the coming year.

1. Industry Cloud

The concept of industry cloud has been gaining traction in recent years. Initially, enterprises focused on merely establishing a cloud presence by migrating non-critical workloads. As a result, only 20 percent of their workloads are currently hosted in the public cloud, with less emphasis on industry-specific or industry-compliant features.

However, looking ahead, financial services firms are expected to migrate more of their critical workloads to industry-specific cloud platforms. These platforms offer new features and services tailored to the industry's needs and requirements.

Although cloud technology has been around for a while, recent developments have made it easier for financial services firms to adopt them. For example, IBM provides an industry-specific platform that automates security and compliance posture.

The world's three biggest public cloud providers, AWS, Microsoft, and Google Cloud, also offer their own cloud offerings. Amazon FinSpace, for instance, is designed to manage and analyze financial data in compliance with regulatory requirements. Microsoft Cloud for Financial Services provides capabilities to manage financial services data and offers a unified customer view to increase customer lifetime value and loyalty. Meanwhile, Google Cloud's API management platform allows retail banks to leverage Open Banking for customer management and regulatory reporting.

In Vietnam, cloud providers like VNG Cloud, have partner ecosystems that enable financial services firms to access relevant software and services, as well as ensure compliance with latest law and regulations of the Government.

2. Explainable AI

Explainable AI is about understanding the data used to train the model, as well as the features and weights used for decision-making and prediction. In 2023, we may even have AI that can interpret the processes of AI for humans.

Compared to other industries, financial services firms are at the forefront of AI adoption, with 54 percent having deployed or accelerated their usage of AI in 2022. This trend is expected to continue throughout 2023, with AI being utilized for a wide range of use cases such as predicting customer churn, extracting data from documents, KYC identification, and loan default prediction.

However, as the usage of AI technologies increases, so does the complexity of the models behind them, such as deep neural networks (DNN). These models can be too intricate for even expert users to fully comprehend, which is a challenge in the financial services industry.

To tackle this issue, we can expect to see an increase in upskilling initiatives in 2023. Additionally, there will be a rise in cloud-native explainable AI, which includes processes, tools, and dashboards that enable internal stakeholders, customers, and regulators to understand and trust the outputs of machine learning algorithms.

Furthermore, financial services firms are expected to establish AI risk management frameworks and form AI governance committees charged specifically with monitoring the risk and fairness of AI decision-making throughout the year.

3. Compliance as Code

A study by IBM has revealed that regulation and compliance are the biggest obstacles to digital transformation within financial services. While there is a drive to increase agility and innovation, this comes with an increased risk of technical misconfiguration of cloud resources.

The reason for this is that cloud resources are continuously developed and iterated upon, but compliance is usually only verified periodically. This creates a potential disconnect between the two, leaving room for drift and non-compliance between audits.

In 2023, a series of new regulations and reforms, including DORA, will put compliance of cloud infrastructure under sharper scrutiny for financial services firms. To address this disconnect, compliance as code will be increasing by continuously monitoring cloud infrastructure for violations.

Compliance as Code is a programmatic approach that transforms human-readable policies into automated, machine-readable processes. It includes a suite of tools and practices that allow risk and compliance stakeholders to specify how cloud resources are configured, ensuring compliance controls are met and providing reassurance.

4. Cloud-based developer programs

Despite the critical role of technology in financial services, the industry has struggled to attract tech talent. As a result, financial services firms have faced challenges in recruiting the talent they need to enhance customer experiences and streamline internal processes, further impeding their digital transformation efforts.

In 2023, we will witness an increase in the adoption of low-code/no-code development platforms to accelerate digital transformation initiatives. This will enable non-technical enthusiasts to contribute to less complex technology projects, such as process/workflow automation and rapid application development.

More financial services firms will experiment with cloud-based low-code and no-code citizen developer programs, allowing business users to define and implement suitable solutions themselves. This will change the role of tech teams, who will need to facilitate citizen developer programs and provide the necessary technical support to mitigate risks. On the bright side, business users with deep knowledge of customer and business problems will have better views to identify and resolve issues using these tools.

5. Green Finance

Typically, when ESG (Environmental, Social, and Governance) issues are mentioned in trend articles, it can be seen as tokenism rather than a genuine indication of impending change. However, the energy crisis will undoubtedly push ESG up the strategic agenda.

As of 2023, the push towards achieving net-zero of Government and enterprises has continued to gain momentum. Many countries, including the United States, China, and the European Union, have set net zero emissions targets by 2050, and are implementing policies and initiatives to reach these goals. Such actions have a significant impact on the financial service sector, potentially leading to “green finance” becoming mainstream in 2023.

Green finance propositions have been on the industry's fringes for a long time. However, cloud-native emerging technologies will finally unlock the era of green finance, with a range of new propositions entering the market. These include green mortgages, energy efficiency loans, financing for electric vehicles, low-carbon farming, solar panels, and other green products that adhere to ESG standards.

To sum up, the digital transformation of financial services will continue to progress in 2023, leading to cost reductions, increased revenue, and improved internal efficiencies. Industry cloud will enable firms to leverage cloud-native technologies and serve underserved segments of the market, including through innovative propositions like green finance. Additionally, trends such as compliance-as-code, explainable AI, and cloud-based developer programs will make financial services and their underlying technology more accessible and useful to a wider audience.