Cloud-based Core: The Future of Banking?
Nowadays, consumers have gotten used to frictionless banking experiences such as accessing account using Face ID or authenticating transactions with biometrics, etc. As almost all the industries are making their move towards modernization, financial institutions are under pressure to adopt the latest technologies giving their existing legacy infrastructure a rest.
Cloud-based core for banking institutions unlocks countless opportunities including but not limited to reduced operational costs, scalability and flexibility on the cloud, and frictionless customer experience to name a few. Today, we will delve into how cloud-based core could be the potential future of banking helping you as readers understand how it impacts you in the long run.
Migrating to a cloud-based core holds gravitas
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Moving to the cloud is one of the biggest concerns for financial institutions. The cost is one of the factors, however, banks are skeptical of the complexities they would face when migrating to the cloud. The user data might be at risk of faltering or there are chances of potential downtime that could add up since a bank deals with tens of hundreds of customers at once.
With all said and done, migrating to the cloud is in fact, beneficial in more ways than you can comprehend as it exhibits long-term benefits.
The Underpinning Benefits of a Cloud-based Core
According to a Retail Banking Report, financial institutions, who were surveyed, selected improved customer satisfaction, increased efficiency, and stronger security as the top benefits of cloud-based core.
Ultimately, what a bank would assume as ‘benefits’ depends on its size. For instance, a small bank would opt for increased efficiency and cost savings and that’s something switching to cloud offers. It may seem counter-intuitive to uproot on-site equipment and switch to the cloud (as it incurs costs), but cloud migrations usually pay off both especially in the long term.
A medium-sized financial institution will look for strengthened security, adapt to growing market demands, and collaborate with technology vendors & third parties, etc. This is where the various use cases of cloud such as security, resilience against breaches, and data protection appear to be the major driving factors behind opting for a cloud-based core.
Finally, a large-sized bank would opt for increased speed to market, scalability, and improved customer retention as the three major benefits to look out for when switching to the cloud.
Adopting cloud solutions unlocks endless opportunities leading the charge to make financial institutions future-ready. Ultimately, keeping pace with the evolving technology forges a bank’s or a fintech’s reputation as being innovative and committed to serving a frictionless user experience to the consumer base.
Choosing from a Plethora of Short and Long-Term Benefits
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Banks are forging strategic partnerships with fintech providers as well as vendors such as cloud solutions from AWS, and Microsoft Azure, among others to inculcate the benefits.
The first and foremost is the cost efficiency of switching from legacy systems to a cloud-based solution as it reduces exorbitant maintenance costs, storage costs, etc. It safeguards against initial upfront investments as banks can opt for pay-as-you-go or other models that suit them best.
Using cloud and AI reduces operational costs as it shortens the need for on-premise infrastructure setup. It cuts back on the maintenance schedule, upgrade, and repair that comes with it. Moreover, running AI helps ascertain shortcomings in the operations and plug them before they can begin to burn holes in the pocket.
Switching to a cloud-based core attends to the fluctuating demands as banks can partner with cloud providers to pay for resources they use and not the whole facility . With elastic resource capabilities, banks can keep their costs at minimal when facing low activity. On the other hand, banks could get additional computing from cloud providers in the events of peak times.
As aforementioned, one of the biggest barriers to the cloud is data security. Banks deal with sensitive financial information and cannot risk exposure even for a second as cyberattackers are always on the lookout for such opportunities.
Cloud security has gotten better over the years as vendors will use security measures to detect any breaches or exploits when in time. Other security mechanisms that are actively in use are encryption, intrusion detection, regular security audits, compliance with regulations, methodologies in case of loss of data and system failure, etc.
Cloud-Based Core Promises Improved Customer Experience
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Exceptional customer experience can shield banks from certain shortcomings. Since banks deal with hundreds and thousands of customers daily, cloud-based core banking talks a lot about improving various aspects of customer interaction across multiple channels such as in-app, on-website, or in-person.
Customers expect faster processing, real-time updates and overall faster services. That’s something cloud solutions can be programmed to ensure reduced human errors that could add delays. Cloud solutions can analyze user data, behavioral analysis, and predictive analytics using AI to understand an individual’s needs and recommend products or services that can be pivotal for the customers.
For instance, data analytics could find an individual’s earnings, spending habits, behavior, weaknesses and strengths, etc. If the individual is inclined towards savings, AI can recommend mutual funds, stocks, and other investment assets among others.
The Barriers to Transformation
Just as in the case of any other technology and its adoption, the cloud-based core for the banking sector is facing similar barriers to transformation as well. One of the major reasons is the current economic climate followed by concerns about security. Costs are one of the driving forces behind the slow pace of movement from legacy to cloud-based systems, however, the latter is much more affordable.
The thing is, the value of cloud adoption has taken a back seat compared to other technologies such as AI and ML. It adds an entry barrier for banks and financial institutions since migration is on low priority. There are also concerns over the lack of resources to manage the migration and thereafter since they require relevant expertise to handle an overhauled digital infrastructure.
Embracing the Cloud
Embracing the cloud is often met with reluctance both internally and externally, however, the long-term goal of switching to the cloud ensures your business will save a lot of money and get an edge over rivals when bringing new systems into the market.
It is critical to understand the objectives behind switching to the cloud such as to improve customer experience, achieving operational resilience, or security, among others. Once the goals aligns, your technology partner should be able to migrate all the systems and data to the cloud with minimal to no downtime as otherwise expected since it could disrupt the business.
Migrate to the Cloud With RA Technologies
Migrating to the cloud may have a tonne of variables to consider. Partnering with RA Technologies opens up opportunities to embrace the cloud and align it with your business objectives and strategies while keeping the budget in check. Contact us at 04 210 1900 for more information.
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July 31, 2024
