Core banking on the cloud, the catalyst for innovation, agility and efficiency – Finextra

For financial institutions, business growth and cost reduction continue to be of paramount importance, which are often tied to establishing a cloud focused approach to enable banking agility and efficiency. With many intermediate steps between consumer need and fulfilment in traditional banking, newer players are entering the market with a lower cost basis on new technology and aggressive acquisition targets tied to lower fees. Disintermediation is becoming an imperative to keep up with demand for lower costs and better value.

This is an extract from the Finextra and Amazon Web Services (AWS) impact study on ‘Core banking on the cloud, the catalyst for innovation, agility and efficiency.’ Click here to read.

Fortunately, advancements in technology have made it possible to automate many areas of the financial services value chain. This has enabled companies to economically provide services to customers that were expensive in the past due to the labour involved. With the benefits of cloud technology, banks do not have to manage legacy issues of infrastructure, as banks still have fixed costs, providing a true opportunity to grow and expand businesses.

Banks strive to be agile and respond to customer demands for personalised products and experiences quickly or inexpensively but find it difficult to navigate with monolithic architectures. To meet evolving customer needs and take advantage of emerging market opportunities, many banks have already started their modernisation journey with cloud providers such as AWS to leverage machine learning, multichannel applications, and mobile platforms at speed and scale.

Click here to read the AWS case study.

Traditional core systems that assume a branch interface and retain human-led back offices no longer meet needs. To be truly agile, banks must prioritise interoperability and automation through digital channels to stay competitive and avoid irrelevance. With this focus on digital transformation and initiatives such as open finance, banks are adopting a buy approach to software and infrastructure, especially when running core business applications on the cloud.

While buying infrastructure can allow banks to scale gradually by purchasing modules to enhance particular aspects of their offering at a gradual pace and relieve internal IT teams, internal development teams are typically less familiar with the required skills for a new initiative than third parties and underestimate the resource or commitment involved, as highlighted by the

Project Management Institute
.

Today, banks do not have to build customised software when providers such as
Backbase
,
Mambu
and Thought Machine have plug and play solutions readily available. Software providers have historically deployed a maintenance model where their customers opt for per-user licenses for a particular service. Now, with Software-as-a-Service (SaaS), software can be centrally hosted and delivered through the cloud.

In addition, many providers are leveraging artificial intelligence (AI) and machine learning (ML) capabilities, and embedding enhanced omnichannel features. This enables banks to optimise, tailor and deliver consistent customer experiences across digital channels, remove friction, and develop deeper trust.

As new technologies open up data streams to and from third parties and emerging startups, banks will be able to offer their customers a range of new products, services and insights that will not only optimise customer experiences, both online and offline, but will create highly personalised, customised relationships. In financial services, Banking-as-a-Service (BaaS) platforms have emerged as an integral part of open finance, where players provide more value-added services for customers by opening their application programming interfaces (APIs) for third parties to develop new services.

This is an extract from the Finextra and Amazon Web Services (AWS) impact study on ‘Core banking on the cloud, the catalyst for innovation, agility and efficiency.’ Click here to read.

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