By Rajasekar Sukumar, Vice President Europe, Persistent Systems
Once a land of physical cheques and paper paying-in books, the banking landscape has changed rapidly in the last decade, with a digital-first approach becoming the norm. But with increasing digitisation comes an increasing reliance on technology.
The sheer volume of data that needs to be processed, analysed and stored in the financial sector is putting pressure on established banks and financial services organisations.
As monolithic legacy systems struggle to keep up, financial services organisations are increasingly turning to cloud and SaaS based technologies, investing large amounts of money, in order to unify their core systems, speed up operational workflows and better manage data. But although the progression is there and cloud tech is becoming a prominent feature in the financial services landscape, the question that now needs to be asked is: is it being leveraged in the right way?
The benefits of cloud technology
The benefits of the cloud have been talked about generically for more than a decade. The headline advantages aren’t new and can apply to any organisation in any sector: no limitations on data storage capacity, the ability to scale quickly, eradication of maintenance by in-house IT teams and moving from CapEx to OpEx.
Yet cloud systems have evolved significantly in recent years and in financial services we see some key areas where the cloud specifically comes into its own.
The cloud is increasingly becoming the solution to some of banking’s biggest operational challenges — managing and unifying their processes, while keeping them adaptable to future change.
Take security for one. The acceleration of cyberattacks in recent years, coupled with the fact that banks hold and process extremely sensitive data, make this essential. There’s a misconception that cloud systems are vulnerable to hackers, but the truth is actually the opposite.
Cloud-based systems have security protocols and various levels of authentication built directly into their systems. The files stored on cloud servers are also encrypted making it harder for cybercriminals to access the information through the scrambled signal.
Governance, risk management and compliance (GRC) is another area that goes hand in hand with data security. In such a highly regulated sector, banks and financial services firms need agile systems where information flows seamlessly for faster and more accurate data management and reporting. In turn, this makes it easier for financial services providers to stay compliant with strict industry regulations.
Personalisation is a key benefit of a cloud-based infrastructure and one that is becoming increasingly important to differentiate and compete. Digital-first banks, built on the cloud, use this advantage to accelerate the development and launch of products and services for niche customer sets.
In contrast, some larger banks are hindered by legacy systems that were designed to attract a large client base. Targeting specific groups with personalised offerings across such an extensive number of customers is a gigantean task.
Cloud-based technology is helping some to overcome this challenge, bringing the agility to launch smaller banking entities or spin-off brands for specific demographic groups, separate from the main banking eco-system. It’s an approach that has allowed them to be competitive in an increasingly crowded digital first banking landscape.
But while all these benefits can be appreciated on their own, it’s only when you utilise what we at Persistent Systems call a digital mosaic architecture that financial services organisations can see the full benefit of a cloud infrastructure.
The cloud-driven digital mosaic
If established banking brands want to stay competitive, they need to embrace cloud as the corner stone of their digital transformation efforts. In doing so, they can create a digital mosaic architecture, where they cherry pick a unique, powerful combination of best-of-breed cloud-based services and applications that the bank needs for its unique proposition, whether that’s current accounts, investment portfolios or credit decisioning.
If we take Formula 1 as an example, years ago when drivers would pull into the pit there would be just a couple of people there to perform all the necessary tasks. They would need to change tyres, refuel, wipe the visor, make repairs and more, but a slow pit stop was often the difference between winning and losing out on the track.
Now, a pit stop has a team of 20 people or more, all with a specific task that they specialise in. This culmination of expertise results in quicker times, better efficiency and a much higher chance of the driver winning the race.
Through the digital mosaic model, banks have this same flexibility to add and integrate the right services, applications and data platforms to meet the specific needs of a particular customer group for a hyper-personalised approach, without having to invest in or manage any technology they don’t need.
For established players, this is the best way to leverage cloud infrastructure, whether they are just starting to use the cloud or are building on the cloud services they already have. For digital-first banks it’s the way to create their whole proposition from the ground up. For both, it removes a dependency on complex, legacy IT infrastructures and offers instead a highly agile, flexible banking architecture.
The digital transformation race is on
As market competition heats up and the customer appetite for simplicity, convenience and personalisation increases, embracing the cloud remains essential, but leveraging the cloud in the right way is how banks will keep ahead of the curve.
If banks can’t change as rapidly as the market, then piece by piece they will lose market share as challenger brands attract their customers and convince them to switch providers. It’s a pace of change that will only continue to accelerate as younger and more digitally-minded generations become both customers and workers in the financial services sector, all focused on innovating and driving change.
A cloud-based digital mosaic architecture offers the ideal technology environment to address these imperatives with speed and flexibility.