4 minute read
Ahead in the Cloud
Making the case for the use of cloud based services in banking, Miljan Stamenkovic, General Manager, MENA at Mambu highlights that its improved service and cost efficiencies will add positively to customer experiences as they seek greater transparency and on-demand services, and that it will provide a smart and secure environment for both them and banks too
It’s estimated that cloud infrastructure accounts for one-third of banks IT spending. Will this proportion reduce or expand in the coming years?
Advertisement
We anticipate the investment into cloud infrastructure will continually increase, driven by the growing risks associated with legacy infrastructures and the shift to digitally enabled financial institutions. In 2020 alone, cloud computing spending increased by 33%, predominantly driven by Amazon Web Services (AWS), Google Cloud and Microsoft Azure. These cloud service providers enable banks to access data storage and processing power from their own data centres dotted around the globe.
After moving to the cloud, banks can always access their data online and use the cloud providers’ computing capacity when needed, instead of running their own servers all year-round.
Is cloud-based computing becoming strategically important to banks and financial institutions?
Banks and financial institutions accelerated their digitisation strategies during the pandemic due to the limitations of in-branch services and the changes in consumer behaviour seen in recent years. Customers are increasingly demanding fast processes, greater transparency and on-demand services that are delivered through a seamless user interface.
Legacy banks have been facing a serious dilemma post pandemic: evolve or eventually become extinct. To stay ahead, many companies are using the principles of composability to secure banking licences and/or deliver a wider range of digital services; incumbent banks are taking note of neobanks because of their long-term threat and ability to adapt.
In short, digital banks are becoming consumers’ primary financial providers at the same rate that traditionals banks are becoming secondary. According to the Global Digital Banking Index by N26 and Accenture, Saudi Arabia (54%) and UAE
(51%) lead the way with the highest share of customers in their financial services markets already having a purely digital bank account. This is also something we increasingly see among millennials globally, as 73% would rather use a digital brand than a bank.
As digitisation takes hold, are more critical front office banking services being migrated to the cloud?
Since the beginning of the COVID-19 pandemic, 58% of customer interactions with companies worldwide are now digital. This means banks and other businesses have had to pivot and present their customer service through different methods. In financial services for example, we’ve seen in-branch services becoming automated through selfdeposit machines for cheques or cash.
The introduction of digitally-enhanced service offerings allows the cloud to break down operational and data silos across customer support. Banks can now be more agile than ever with the analysis of any individual customer readily available. This allows banks to deploy products and services that drive conversion, increase engagement and build loyalty.
Are fintech’s taking an increased role in providing cloud-based managed services and will this lead to more engagement between banks and fintech?
Cloud-native fintech’s are able to support traditional banks as they migrate from existing legacy IT architectures to a more modern and agile arena through digital spinoffs. It’s something we’ve seen through the likes of ABN AMRO with their launch of digital speedboat, New10, as well as ADQ and FAB with the introduction of their next-gen banking platform named WIO. Fintechs are taking an increased role in providing cloudbased services, which will continue to drive engagement between banks and fintechs going forward. Interestingly, 94% of financial service companies said they
It also saves time. Incumbent IT architectures often require hours to pull out consumers’ data. Because the cloud runs on an ecosystem of API’s, banks are now able to optimise processes for both employees and consumers within a matter of seconds or minutes through real-time processing.
Miljan Stamenkovic, General Manager, MENA at Mambu
are confident fintechs would help them grow their company revenue over the next two years.
Has the cloud improved banks’ data storage and analytics gathering capabilities?
Banks that embrace cloud-based computing to deliver products and services are able to achieve faster growth
due to cost efficiencies, convenience, speed and increased security. Transferring consumer data to a cloud infrastructure significantly reduces banks’ overheads as it removes the need for physical data centres. And when the average yearly cost of running a data centre ranges from $10–25 million, it’s safe to say the cloud removes a significant weight from the shoulders of banks.
What are the security advantages of having services based in the cloud?
The expertise and cutting-edge resources that cloud-based software providers offer drastically reduce the risk of data tampering compared to on-premises facilities. Cloud based services can provide the advantage of real-time monitoring around the clock, 365 days a year, ensuring reliable functional infrastructure and services, which reduces the vulnerability to security breaches.
The banking industry, one already characterised by heavy regulatory presence, is now also facing increased pressure to level up their security systems. Those who don’t could face hefty fines. This is what happened with
Capital One bank, which in 2019, suffered one of the biggest data thefts, exposing personal information data of millions of banking users. However, after migrating to a cloud infrastructure produced by AWS, things couldn’t be better for Capital One. They have since closed eight data centres and adapted to seasonal demands by renting servers as opposed to running them all year round.
