Banking on the cloud

The bank­ing indus­try is expe­ri­enc­ing a mas­sive trans­for­ma­tion, pri­mar­i­ly dri­ven by evolv­ing cus­tomer expec­ta­tions and rapid tech­no­log­i­cal advances.

With con­sumer-focused com­pa­nies like Ama­zon and Net­flix offer­ing seam­less dig­i­tal expe­ri­ences, cus­tomers expect their finan­cial insti­tu­tion to offer the same effi­cient, dig­i­tal and per­son­alised ser­vice.

How­ev­er, low inter­est rates and new reg­u­la­tions are weigh­ing on the top line, while high com­pli­ance costs are eat­ing into the bot­tom line. The net result is that many, if not most, finan­cial insti­tu­tions are strug­gling to earn their cost of cap­i­tal while also ade­quate­ly enhanc­ing the cus­tomer expe­ri­ence.

While the chal­lenges fac­ing the finan­cial ser­vices indus­try may appear daunt­ing, oppor­tu­ni­ties abound. In fact, there is a viable solu­tion for advanc­ing dig­i­tal ini­tia­tives that pos­i­tive­ly impacts bank oper­a­tions, inter­faces between sys­tems and, most impor­tant­ly, pro­motes a con­sis­tent, high-qual­i­ty client expe­ri­ence: the cloud.

Cloud com­put­ing is no longer just an option for banks that want to com­pete at the high­est lev­el; it’s a strate­gic imper­a­tive

Cloud com­put­ing is no longer just an option for banks that want to com­pete at the high­est lev­el; it’s a strate­gic imper­a­tive. The savvi­est banks have already turned to cloud com­put­ing, which not only promis­es pro­duc­tiv­i­ty and effi­cien­cy gains, but also the chance to com­pete on a lev­el play­ing field against nim­ble upstarts in the fin­tech space by pro­vid­ing a dig­i­tal and seam­less cus­tomer expe­ri­ence.

For a vari­ety of rea­sons, Euro­pean banks have been slow­er to adopt the cloud than their North Amer­i­can and Aus­tralian coun­ter­parts. But that atti­tude is quick­ly chang­ing. Accord­ing to Inter­na­tion­al Data Cor­po­ra­tion, cloud spend­ing is expect­ed to sky­rock­et. By 2021, banks glob­al­ly are fore­cast to spend more than $12 bil­lion on pub­lic cloud infra­struc­ture and data ser­vices, up from $4 bil­lion last year. Banks that want to stay com­pet­i­tive will have to fol­low suit, lest tech­no­log­i­cal­ly supe­ri­or peers steal mar­ket share.

Banks have been under­stand­ably slow­er in migrat­ing prod­ucts and ser­vices, and lever­ag­ing the ben­e­fits of the cloud. How­ev­er, as cloud com­put­ing has increas­ing­ly proven to be a reli­able and cost-effec­tive oppor­tu­ni­ty, it’s now an essen­tial ingre­di­ent of com­pet­i­tive bank­ing and meet­ing cus­tomer expec­ta­tions. As such, it’s nec­es­sary to appre­ci­ate the cen­tral role that effi­cien­cy plays in not only a bank’s short-term prof­itabil­i­ty, but also its long-term sol­ven­cy.

Con­sol­i­dat­ing oper­a­tions into a cloud-based plat­form helps auto­mate man­u­al tasks, elim­i­nate paper and increase trans­paren­cy, which lead to mas­sive effi­cien­cy gains. Case stud­ies at IBM sug­gest that an effec­tive cloud strat­e­gy can reduce a bank’s infra­struc­ture and soft­ware appli­ca­tion costs by 40 per cent.

The aver­age client of nCi­no, which pro­vides a cloud-based dig­i­tal bank­ing plat­form, expe­ri­enced a 17 per cent reduc­tion in oper­at­ing costs and 22 per cent increase in staff effi­cien­cy after deploy­ing the Bank Oper­at­ing Sys­tem. Specif­i­cal­ly, an nCi­no client in the UK not­ed that the plat­form helped play a part in ensur­ing the bank is able to trans­act loans as quick­ly as pos­si­ble with aver­age trans­ac­tions, from first meet­ing to cash dis­burse­ment, being com­plet­ed in weeks, com­pared with six to nine months for tra­di­tion­al high street banks.

As tan­ta­lis­ing as effi­cien­cy gains are, many banks have hes­i­tat­ed to embrace the cloud ful­ly because reg­u­la­tors have not laid out clear­er guide­lines around its use. How­ev­er, as reg­u­la­tors in the UK and Euro­pean Union make con­cert­ed efforts to spur com­pe­ti­tion and inno­va­tion, it appears increas­ing­ly like­ly that the flood­gates could soon open.

In fact, reg­u­la­tors have them­selves begun using the cloud for data stor­age and report­ing, includ­ing the Finan­cial Indus­try Reg­u­la­to­ry Author­i­ty, which works with Amazon’s AWS. To this end, Deutsche Bank pre­dicts that use of the cloud by banks will ramp up “mate­ri­al­ly”.

Oppor­tu­ni­ties to increase effi­cien­cy and reduce costs are only some of the cloud’s pri­ma­ry sell­ing points. An addi­tion­al and valu­able ben­e­fit con­cerns secu­ri­ty. As cyberthreats con­tin­ue to mate­ri­alise, secu­ri­ty stan­dards need to trans­mute to counter those threats and pro­tect data.

This is why secur­ing data behind the heavy secu­ri­ty blan­kets of cloud providers has become such an entic­ing propo­si­tion. Giv­en the size and sophis­ti­ca­tion of the lead­ing cloud com­pa­nies – be it Ama­zon, Google or Sales­force – there’s no ques­tion that they are among the world’s most respon­si­ble stew­ards of data. Accord­ing to BBVA: “Cloud plat­forms are devel­oped with con­nec­tiv­i­ty in mind by spe­cialised com­pa­nies with very lit­tle lega­cy con­straints, which makes them poten­tial­ly more secure.”

For those rely­ing on age­ing servers, net­works and infra­struc­ture, secu­ri­ty con­cerns abound, but banks are real­is­ing that secu­ri­ty and pri­va­cy can sim­ply be done bet­ter. Mov­ing from on-premise dat­a­cen­tres to the cloud alle­vi­ates many issues, includ­ing pro­vid­ing a more reli­able busi­ness con­ti­nu­ity solu­tion, as well as the abil­i­ty to move data more quick­ly.

While many finan­cial insti­tu­tions still rely on archa­ic soft­ware to pow­er their day-to-day busi­ness, mod­ernising these lega­cy sys­tems will ben­e­fit not only the bank, but more impor­tant­ly the cus­tomer.

The silos that exist between dis­joint­ed lega­cy sys­tems lead to a frag­ment­ed view of the cus­tomer. Firms that lack a com­plete pic­ture of a cus­tomer life cycle, for exam­ple know­ing that a home buy­er apply­ing for a mort­gage should trig­ger a homeowner’s insur­ance pro­mo­tion, miss out on impor­tant cross-sell­ing and rela­tion­ship-build­ing oppor­tu­ni­ties. As a result, non-bank and alter­na­tive providers are cre­at­ing niche prod­ucts, which con­sumers have been quick to adopt.

Stream­lin­ing process­es and con­join­ing the back and front-end of bank oper­a­tions via a sin­gle cloud-based plat­form enables banks to offer the speed and con­ve­nience to com­pete with nim­bler star­tups, while also strength­en­ing rela­tion­ships.

By adopt­ing cloud-based tech, for­ward-think­ing finan­cial insti­tu­tions can take advan­tage of new, secure tech­nolo­gies to meet inten­sive com­pli­ance stan­dards and also give cus­tomers exact­ly what they want: fast and con­ve­nient access to their mon­ey and a mod­ern, dig­i­tal expe­ri­ence. The banks that recog­nise these needs and deliv­er a seam­less solu­tion will be the win­ners in the long-term and be well posi­tioned to over­come any reg­u­la­to­ry bar­ri­ers to suc­cess.

It’s not so much a ques­tion of if a bank should move to the cloud, but when.

For more infor­ma­tion please vis­it ncino.com