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Modern Digital Banking Experiences Built on Cloud

November 30, 2022

  • Banking-as-a-Service
  • Cloud
  • Customer Expectations

The banking industry, among other industries, has witnessed a massive shift in customer behaviour with the growing use of digital channels, resulting in an increased volume of data banks manage. This data sits at the heart of the digital banking trend to provide superior, personalised, and highly secured service.

By Kalpesh Mistry, Senior Vice President – BFS, ITC Infotech

Cloud technology is becoming instrumental in reshaping digital banking services, making banking more seamless and convenient for customers. Over the last 5 years, banks have invested significant money in implementing omnichannel solutions powered by microservice-based architecture on a hybrid cloud environment with limited cloud adoption for their core banking and data solutions.

Many banks have embraced a lift and shift strategy to move some banking applications onto the cloud-virtualised platform to manage the regulatory expectation for their old data centre and reduce the Infra cost. But the establishment of full-scale cloud services like cloud-based data analytics and the transition of legacy core banking solutions to the cloud, is still in the early stage. On the other side, FinTechs have quickly identified the growing demand for digital banking and are the early adopters of establishing full digital banking on the cloud.

Kalpesh Mistry, Senior Vice President – BFS, ITC Infotech
Kalpesh Mistry, Senior Vice President – BFS, ITC Infotech, discusses digital banking

As most banks move towards Banking-as-a-Service on the cloud from their partially modernised banking solution implemented on an on-premise/hybrid cloud environment, it is essential to understand the possible challenges that could stand in the way of the bank modernisation journey.

Challenges Faced while Digitizing Banking on the Cloud

According to a study by Bain&Co, 80% of CEOs believe they deliver a superior customer experience, while only 8% of customers agree. This disagreement means that the banking impact on customers is heavily misunderstood.

  • Customers’ expectations are rising quickly as transaction volumes, and associated revenues are shifting to challenger banks/FinTechs in the market. Banks must reinvent themselves with better digital banking tools to deliver a personalised experience. FinTech startups leverage AI/ML-based solutions to meet customers’ needs at a granular, tailored level. Their key focus is improving the delivery of financial services with a seamless user experience and simplifying the banking experience for customers.
  • The security infrastructure and firewall are continuously upgraded to protect banks from cyber-attacks and various other security threats. However, we continue to see that security is compromised, which has resulted in penalties from regulators and impacted the customers’ trust in the banks. While a bank is moving its complete banking service and growing customer data to the cloud, it is important for the bank to redefine its IT security ecosystem and the resilience strategy along with the chosen cloud partners.
  • Innovation and modernisation are imperative but require investment in people’s skill transformation. Lack of cloud technical expertise will affect cloud and product implementation. Creating a product or solution from scratch could drain time, money, and resources, along with siloed processes and slow decision cycles, which could delay time-to-market. Many banks lack the internal capabilities to innovate secured digital banking on the cloud.
  • Cultural resistance – rigidity in the internal customers’ mindset must be transitioned to an agile one for a smoother transition to digital banking operations. The cultural resistance is linked to the bank’s investment in improving internal cloud competency.

Banks are adopting the strategy outlined below to accelerate digital banking on the cloud to maximise ROI

  1. SaaS: a cloud-based Banking-as-a-Service solution

Build a tech stack of best-of-breed, Cloud-native technologies that allow the bank to swap components in and out as needed. A ‘”plug and play’ SaaS applications approach can help banks minimise time-to-value and time-to-market. SaaS Cloud solutions stand out from on-prem solutions due to their flexible pricing and subscription model, which delivers easy scalability while meeting the ongoing needs of an enterprise.

  1. Open banking is considered at the heart of digital banking on the cloud strategy

According to a survey by Open Banking Org, 10–11% of digitally-enabled consumers are now estimated to be active users of at least one open banking service. This is expected to grow exponentially in the next 3 years. Open banking cloud architecture enables the data and services from various third-party sources, uses machine learning to generate granular insights, and then integrates data into banks’ channels in real time. Cloud has become one of the main allies in creating an open API secure open banking ecosystem to provide personalised digital banking solutions to improve the customer experience.

  1. Collaborative engagement with a ‘Hyperscaler’ cloud provider

Proactive engagement with Hyperscaler cloud providers assesses the current technology ecosystem and defines the plan to develop the same. Hyperscalers provide various support, including technology assessment, future roadmap definition, POC, and training. Collaborative engagement with hyperscalers is crucial while the bank is in the early stage of development.

  1. Internal team onboarding

Employees and internal audiences can individually benefit from Banking-as-a-Service on the cloud. The bank’s management must leverage effective communication media to onboard employees on the cloud journey through newsletters, web pages, and regular town hall meetings to ensure awareness of a cloud strategy is present across the bank thus ensuring a smooth, uniform transition with fewer bottlenecks.

  1. Internal resource competency

Getting on the cloud is a journey, not a one-time exercise. While the IT team focuses on the technology roadmap and implementation, the HR and Training team must be empowered to define a roadmap for the upskilling of resources. The organisation also needs to leverage the training investment of the Hyperscalers and IT partners effectively. The bank must define the training goals jointly with its partners before beginning the cloud journey, and progress must be measured and governed by the executive steering committee.

Cloud technologies provide a best-in-the-class secured environment for a bank to fast-track its digital bank cloud strategy to deliver the increasing demands of digitisation. The cloud strategy has been utilised so far for its scalability and cost optimisation. But the way forward for a successful bank is to leverage hyperscaler nextgen investment in various cloud components such as data analytics and insight, Blockchain and more, to deliver higher value to its customers.

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