Cloud computing in banking
In an era marked by technological disruption, the marriage of cloud computing and banking has emerged as a powerful catalyst for innovation. As McKinsey's article "Cloud's trillion-dollar prize is up for grabs" 1 highlights, the financial sector stands on the precipice of a transformative shift, one that promises to reshape the industry and unlock substantial value. This value is not limited to mere cost efficiencies but extends to operational streamlining, enhanced customer experiences, data-driven insights, and the fostering of innovation through open platforms.
Revolutionizing Banking with Cloud-Powered Innovations
Traditional banking IT budgets are burdened by legacy systems, consuming over 70% on maintenance alone. Embracing cloud-native core banking systems revolutionizes this landscape, significantly cutting costs while enabling flexible, API-driven architectures ideal for open-banking initiatives and reducing complexity.2
An exemplary illustration of cloud-powered innovation is the collaboration between Amazon Web Services (AWS) and National Australia Bank (NAB). Through this partnership, NAB deployed Amazon Connect, a cloud-based contact center solution, to improve its customer service experience. This provides NAB with conversational AI capabilities like chatbots and natural language processing to deliver more intuitive customer interactions. The scalability of Amazon Connect on the AWS cloud also enables NAB to easily support contact volume spikes and new communication channels.3
Strategic Cloud Orchestration for Unprecedented Growth
Crafting a robust cloud strategy is pivotal for driving innovation. Establishing a clear vision, prioritizing use cases, ensuring governance, developing organizational capabilities, and fostering an innovation-centric culture empowers banks to navigate complexities, maximizing cloud benefits.2
The beginning of a new era in banking signals that cloud technology is transcending its role as a cost-saving mechanism and rising as a strategic enabler of innovation. The transformative potential of the cloud is driven by its ability to rapidly conceive, develop, and deploy novel products and services while simultaneously reducing time-to-market.4The cloud empowers banks to innovate by providing the essential infrastructure and tools for experimentation and scalability. This resonates with the industry-wide shift wherein cloud-enabled innovation is fostering the creation of novel business models and delivery mechanisms, thus redefining the traditional banking landscape.
Cloud Adoption Propels Transformation
The profound impact of cloud technology on banking innovation finds resounding affirmation in how cloud adoption underpins digital transformation within the banking sector. By integrating advanced capabilities like AI, machine learning, and advanced analytics, banks can provide customers with seamless, personalized experiences, thus epitomizing the synergy between technological advancement and improved customer interactions.
Amazon Web Services (AWS) has been at the forefront of propelling banking innovation through the cloud. AWS serves as a catalyst for innovation by enabling banks to experiment, develop, and scale groundbreaking solutions at an unprecedented pace. This accelerated innovation is complemented by robust security and compliance measures, a testament to the symbiosis of agility and responsibility in cloud-powered banking. The ability to swiftly adapt to customer needs, facilitate rapid innovation, and ensure regulatory compliance underscores how the cloud serves as a transformative force.5
Moreover, the transition toward cloud-powered innovation is not isolated as it reflects broader trends in banking. As outlined by AWS for Industries, an intuitive and frictionless access to banking needs accentuates how cloud adoption is integral to providing superior customer experiences.6 The cloud acts as the bedrock for customer-centric transformation, driving improvements in efficiency, personalization, and accessibility.
See Source7
In addition to the business impacts discussed in table above, it is essential to recognize the technology impacts. Storage solutions have evolved to streamline email archiving and voice chat storage, providing secure, scalable repositories for compliance and centralized access. Reporting and analytics benefit from cloud technology as banks leverage it as a robust platform for real-time customer insights and reporting, enabling data-driven decision-making that enhances both customer experiences and operational efficiency. Cloud adoption extends beyond data management, encompassing containerization, APIs, and microservices, fostering agility in development and integration, ultimately resulting in faster innovation and more seamless financial services.
The investments and anticipated growth in technology underscore the significance of cloud computing as the primary driver in the evolution of technology services. Globally, within the financial services sector, institutions are harnessing the potential of various cloud models - private, public, and hybrid - to spearhead innovation in their offerings. These cloud-based solutions not only pave the way for groundbreaking products and services but also catalyze overall business transformation, setting new benchmarks for what can be achieved in the industry.
Cloud Banking and Elevated Customer Experience
Since the advent of cloud banking, customers have subsequently developed the expectation of immediate responses to their banking needs and banks have appropriately adjusted their focus regarding customer interaction. Customers want to be able to quickly handle issues themselves regarding payments, disputes, and account information. On top of expedited service, customers are also expecting their banks to produce offers that meet their personal needs. This was demonstrated in a Bain study where interaction through digital means increased 50% compared with the entire customer base.8
Embracing Innovation with Cloud Banking
With agile fintech disruptors fully harnessing cloud to rapidly roll out innovations, incumbent banks must formulate cloud strategies to compete. To fully capitalize, banks must accelerate cloud adoption to boost efficiency and resilience. Only those who skillfully balance security, compliance and innovation imperatives will gain a distinct competitive edge. By embracing cloud-first strategies, banks can explore new avenues for differentiation and profitability to thrive. A new operating model that demands a paradigm shift are those who skillfully evolve will shape the future of banking.9
In conclusion, the convergence of cloud computing and banking is giving way to a new era of innovation. The cloud's ability to revolutionize operational paradigms, amplify customer experiences, and foster innovation attests to its trillion-dollar potential. As the financial sector embraces the cloud, it simultaneously embraces a future characterized by innovation, responsiveness, and an unwavering commitment to customer-centricity.
About BIP.Monticello:
BIP.Monticello, a member of the BIP Group, is a management consulting firm supporting the financial services industry with its expertise in digital transformation, change management, and financial services advisory. Our understanding of the competitive forces reshaping business models in capital markets and digital banking are proven enablers that help our clients drive innovative change programs to be more competitive and gain market share in new and existing businesses. In partnership with Bip.xTech, we collaborate with our clients to infuse the spirit of data-driven organizations and build digital solutions, helping them make their operations more efficient and achieve a competitive advantage in the marketspace.
McKinsey. "Cloud's trillion-dollar prize is up for grabs." https://www.mckinsey.com/capabilities/mckinsey-digital/our-insights/clouds-trillion-dollar-prize-is-up-for-grabs
McKinsey. “Winning in digital banking “https://www.mckinsey.com/capabilities/mckinsey-digital/our-insights/tech-forward/winning-in-digital-banking
Amazon. "National Australia Bank Selects AWS as a Long-Term Strategic Cloud Provider" https://press.aboutamazon.com/2018/11/national-australia-bank-selects-aws-as-a-long-term-strategic-cloud-provider
Capgemini. "Cloud computing in Banking https://www.capgemini.com/wp-content/uploads/2017/07/Cloud_Computing_in_Banking.pdf
Temenos. "The Future of Digital Banking in the Cloud." https://www.temenos.com/wp-content/uploads/2020/05/Future-of-digital-banking-in-the-cloud_-1.pdf
AWS for Industries. "Banking Trends 2022: Transforming Customer Experience." https://aws.amazon.com/blogs/industries/customer-experience-transformation-in-banking/
Cloud banking: More than just a CIO conversation https://www2.deloitte.com/za/en/pages/financial-services/articles/bank-2030-financial-services-cloud.html
Bain. Customer Behavior and Loyalty in Banking: Global Edition 2023 https://www.bain.com/insights/customer-behavior-and-loyalty-in-banking-global-edition-2023/
Accenture. The ultimate guide to banking in the cloud https://bankingblog.accenture.com/the-ultimate-guide-to-banking-in-the-cloud