ESG, cloud, AI: Cloud leader Teradata’s predictions for 2022

ESG will define banking in 2022

Following the commitments made at COP26, the industry will be waiting in anticipation for new regulations and legislation that will impact the banking sector. Banks have a critical role in translating commitments into actions by influencing where, how and when money is spent. Whilst regulators, like the Bank of England and the European Union, have so far shied away from directing money flows to more rather than less sustainable businesses, pressures are mounting on banks to wield their considerable financial power in support of climate commitments.

2022 will see sustainability reporting become as significant as regulatory reporting. To do so, banks will need granular information on a host of factors that determine environmental impacts over time and risk across all sectors and all kinds of assets and investments. The challenges are not insignificant – specifically around the quality and comparability of emissions data in different sectors. However, banks will play a role as both customers and providers of data that can drive more positive environmental outcomes.

2022 will be a landmark year for cloud migration in banking, creating systemic risks

Too big to fail used to apply exclusively to banks and financial services institutions, but now regulators around the world are concerned about a different type of organisation creating systemic risks to the global financial system. As more banks move critical processes to the cloud – and we anticipate that this will increase through 2022 – reliance upon a very small number of dominant cloud service providers are creating risks to operational resilience. Regulators are likely to act fast in the coming year to ensure that these risks are mitigated and that banks can manage stressed exits from cloud providers should the need arise. To prepare for inevitable tests of ability to manage these stressed exits, and for potential actual cloud failures, as well as meet regulatory concerns, banks will begin to move to connected hybrid, multi-cloud platforms, allowing for a more flexible approach to cloud migration

AI in banking will progress from ‘hype’ to actual progression

The number of bank branches in the European Union fell from about 238,000 in 2008 to 174,000 at the end of 2018, European Banking Federation figures show. This was further accelerated as a result of the pandemic, with more customers moving their banking online out of necessity. We will continue to see additional branch closures in 2022 in an effort to increase efficiency and reduce headcount, as banks strive to further digitise processes.

As a result of creating these efficiencies, banks will have more resources to allocate to ESG, as well as customer transformation. Part of the customer transformation journey will be focused on AI adoption, which has received a lot of hype over the past number of years without achieving any notable traction to date. This will change in 2022 as banks seek to transform their approach to analytics in order to improve their stagnating analytic capabilities.