Catalysing Digital Transformation with Cloud for Banking

Banking can no longer be constricted by physical branches, legacy systems, or segmented databases. Leveraging the cloud infrastructure will play a big role in this transformation.

By Kishan Sundar

While the cloud has emerged as a mainstream technology for the banking industry over the years, the pandemic of 2020 forced banks to expedite the cloud adoption and respond to a changing landscape with a new mix of business strategies – all with cloud computing at the heart of their execution.

Pushing the boundaries of new horizons has already begun. Capital markets and banking leaders are increasingly recognizing the importance of the cloud as more than a technology. They are realizing that the cloud is more of a destination for financial services institutions to store data, applications, and advanced software applications, and can prepare them for the future. Nearly 80% of Indian corporate banks, in fact, are forecasted by IDC to run all trade finance and treasury workloads on the cloud by 2024. Furthermore, in response to the pandemic’s stress on liquidity, ~55% of corporate banks are projected to invest in supporting predictive liquidity management capabilities by 2024.

In this article, therefore, I would like to explore some ways banking transformation is already taking place on the cloud across some key focus areas for cloud investments. Before that, however, we will decode some traditional mind blocks when it comes to banking on the cloud.

Unblocking mind blocks in adopting cloud for banking

The skeptics have not always been sure about the cloud, citing regulatory ambiguity, security concerns, the sensitive nature of the data a bank carries, etc. But the questions that have always plagued banking leaders the most, have been about how they can overcome the stumbling blocks of legacy infrastructure or the deeply coupled system which is running for ages.

For one, the monoliths are not only cumbersome and costly to maintain, but they also run on obsolete technology with little to no updates. Secondly, legacy systems may have stood their ground through the technological storm, but they still aren’t designed for the fast-moving nature of the digital age. Finally, the rigid organizational structure and siloed nature of traditional working form a huge barrier to innovation in banking. The shift to the cloud means more than migrating simply IT assets and calls for an agile, future-ready, and resilient mindset.

Such a culture of innovation only comes through a thorough adoption of customer-centric, risk-averse, and change in attitude. Given the process is time-consuming and expensive, even the smallest misstep can result in service disruption and/or attract regulatory scrutiny.

At the end of the day, independently installed technologies over the years combined with the concerns about protecting both institutional and customer data have made banking leaders embed digital operations within their site, proceed cautiously, and slower than other technology-catalyzed industries.

That said, this approach only works if the institution is not only well funded but also can afford a large IT team of developers and programmers with adequate productivity and flexibility for storage and computing issues. While this traditional tactic can work for a few, and the short term, banking leaders are still left without the strategy to address the opportunities in next-gen cloud-based core baking systems.

Banking on the cloud for digital maturity

From digital identification with Aadhar, interoperable and open-API by UPI, video-KYC to revolutionary ‘Digital India’ initiatives, the regulatory ecosystem in India has ensured that customers are more engaged with digital means of financing.

Combine this with incumbent fintech firms expanding the reach of financial services in innovative, low-cost, cloud-first ways, the digital maturity in banking is steadily playing catch up due to the challenges of moving too fast. But the pandemic has changed all of that.

Due to lockdown restrictions and norms, banking is expected to no longer be constricted by physical branches, legacy systems, or segmented databases. Banking leaders can lay a critical role in leveraging the cloud to catalyze this transformation by investing in the cloud for a few critical areas, some driving business frontiers externally, and some optimizing the organization within.

• Syncing the enterprise: Ensuring better integration of departments and business units through shared data to drive insights-driven and integrated decisions
• Building resilient operations: Enhancing the overall resilience of the bank to respond to disruptions quickly, as well as gain the ability to replicate data and services across regions with unified visibility.
• Driving business innovation: Innovating and driving strategies to improve customer experiences, create new market offerings, retain customers effectively leveraging new technologies such as machine learning, automation, AI, and more.
• Enhancing IT security: It is important to have a clear knowledge of how security varies on the cloud given the native tools to each cloud environment, and how the cloud provider takes care of security for low-level layers of the infrastructure.
• Discovering new ways to work: Aligning cloud strategy with business goals not only helps with process improvements and connectedness, but it also brings in new ways of working, new talents for required skill sets as well as holistic agility in daily operations.
• Flexibility in scaling computing costs: Cloud not only helps pave the way for innovative technologies but also helps move away from the heavy up-front capital spending required (Capex), towards an operational one (Opex).

Cloud on every board’s agenda

Cloud is a top agenda for every banking CIO. Axis Bank, for example, has confirmed being on track to take 70% of its apps and infrastructure to the cloud within the next two years.

Yes Bank also continues to stress the importance of using cloud-native architecture and infrastructure to leverage new technologies such as Artificial Intelligence, Machine Learning for better operations and customer experiences. Or take The State Bank of India’s strategy of scaling their SBI Card business, marketing, and HR ecosystem with the cloud. The possibilities are endless.

After all, in a world with increased blurred boundaries – where Google’s smart devices and platforms can deliver banking experience and ride-sharing apps can offer loans – banking is at a nexus of transformation. Not only must they ruthlessly determine goals while playing to their strengths, but they must also harness digital technologies to drive greater efficiency and be agile when faced with volatile market adversities.

Sundar is Senior Vice President of Digital Technologies, Maveric Systems   

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