Banks’ journey to the Cloud in India: Sonali Kulkarni, Accenture

The pandemic, to an extent, has made it obligatory for companies to adopt cloud to ensure business continuity. Even the banking sector, which is known to be fraught with legacy challenges, has embraced the technology. In fact, 95 percent of banks across the world have moved at least some of their workloads to the cloud, and they recognize that the future of banking is in the cloud. However, the journey to the cloud for Indian banks in particular is challenging as the sector has been slow to embrace the cloud in a holistic manner and is still struggling to figure out the right path. Sonali Kulkarni, Lead - Financial Services, Accenture in India recently spoke to Dataquest about why cloud adoption has been slow for Indian banks, and what needs to be done to help them deal with the challenges that come across with digital transformation.

DQ: What were the top myths that have traditionally slowed down cloud adoption in the banking sector in India?

Sonali Kulkarni: Security and compliance risks, an incomplete understanding of the costs involved and unrealistic expectations of the return on investment (RoI) have traditionally been the biggest perception-based barriers to cloud adoption by banks. Whereas legacy IT infrastructure, a lack of cloud governance mechanisms and a lack of digital skills are more genuine challenges. 

Not long ago, concerns were raised regarding the security and auditability of the cloud. However, major cloud hyperscalers have been investing heavily in the security and resilience of their cloud infrastructure, and their environments are as secure or perhaps even more secure than on-premise data centers owned or leased by banks - provided the right security controls are in place. Secondly, there was a perception that the private cloud is more secure than public cloud. While private cloud offers more personalised security features, it does not automatically ensure more security. In fact, in some cases, public cloud may actually be able to offer more robust security updates. Lastly, all major cloud service providers are compliant with RBI guidelines on the outsourcing of financial services to service providers and data localization requirements. Therefore, it’s time to embrace the cloud as an enabler of security and compliance instead of a barrier. 

The other long-standing myth was that cloud adoption comes with ‘hidden’ costs. This was because banks lacked a holistic picture of what is involved and did not factor in the costs of cloud migration, managing dependent applications, streamlining business processes and most importantly, rearchitecting for the cloud and developing digital skills. 

In terms of the return on investment, we have found that holistic cloud adoption yields strategic benefits such as enterprise agility, the ability to scale exponentially, faster time to market, digital resiliency and support for digital-native innovation. However, if a cloud program is poorly designed and badly managed, then the results will be unsatisfactory. E.g., A plain lift and shift cloud migration will yield limited results whereas a well-thought-through enterprise cloud strategy with strong C-suite backing can enable superior business performance.

DQ: Studies claim that the pandemic has led to an increase in cloud adoption. How has this trend impacted banks?

Sonali Kulkarni: According to our “Make the Leap, Take the Lead” research, 68% of surveyed technology leaders across the world have accelerated their investments in hybrid cloud post pandemic. The pandemic has underscored the importance of enterprise agility and the flexibility to embrace new business models, new ways of working and operate in a whole new paradigm, and the cloud has emerged as the linchpin.

The cloud has allowed banks to scale up their customer-facing digital applications, enable remote work for their employees, deal with a surge in fraudulent transactions and cybersecurity incidents, and scale up innovations such as video KYC, contactless payments and video collaboration tools at a time when social distancing was key. 

Payments infrastructure and loan origination systems have already started transitioning to the cloud and given the growth of digital-native business models, we expect banks to accelerate their journey to the cloud. In addition, they will invest in a human+machine operating model that will shape the future of work at banks.

DQ: What are some of the factors that banks need to consider as they evolve their cloud capabilities?

Sonali Kulkarni: Firstly, banks should know that there isn’t a ‘one-size-fits-all’ approach to their cloud strategy. Based on their business goals and future requirements, they need to custom-build their cloud journey – be it their choice of public, private or hybrid cloud model, cloud service provider (CSP) and even the workloads to be moved to the cloud. 

Secondly, banks should prioritize security and compliance throughout the cloud lifecycle. Thirdly, ensuring interoperability and data portability is vital for hybrid and multi-cloud deployments. 

Finally, in order realize the full potential of their cloud investments, banks need to look beyond a simple ‘life and shift’ cloud migration strategy, and instead rearchitect and build for the cloud. To do this, they need to get their cloud foundation right and adopt a platform-led approach with microservices-based decoupled architecture and well-defined APIs. Developing digital, cloud and data skills is equally important.  

DQ: Why is ‘data on the cloud’ increasingly becoming more important? Why should Indian banks adopt a more data-driven driven organizational culture?

Sonali Kulkarni: The amount of data that banks generate and store is growing rapidly. Their demand for computing power to run AI-based applications is also increasing exponentially. Yet for most banks, data storage and compute power are already reaching available capacity which makes on-premise data lakes and analytics environments increasingly expensive and slow. The scalability, elastic storage and compute that the cloud offers can help effectively overcome this challenge. By putting data on cloud, AI and machine learning models are no longer constrained by the infrastructure powering them, and banks can explore ways of using their data and develop more sophisticated analytical models.

A modern data foundation on cloud helps banks derive real value from their data by making it more accessible, trustworthy and timely. This can empower bank employees to adopt a data driven approach – one that allows them to blend data from different sources together in real-time, build agile reporting, and leverage analytics and AI to develop insights that deliver meaningful business outcomes. For example, front-lines bank sales teams can use data-driven insights to curate personalised offers and experiences. AI/ML-driven nudges can help staff better prioritize critical customer servicing tasks. Similarly, data and AI-driven credit risk management tools can generate early warning indicators so that banks can pre-emptively realign their collections strategy or restructure their customer portfolio to manage asset quality.   

DQ: What is the future of cloud adoption in the Indian banking landscape?

Sonali Kulkarni: Across the world, cost optimization is one of the most compelling reasons for banks migrating to the cloud. But that may not be the best reason for cloud adoption in India as cost of hardware is relatively lower here and banks’ investments in data centers are fully depreciated. 

Instead, banks in India need to look at cloud adoption as a way of scaling capacity, automating processes, achieving faster time to market, strengthening new ways of working, driving innovation and building new business models – such as open banking and banking-as-a-service. They need to treat the cloud as the operating model of the future - in the same way that fintechs have leveraged digital-native business models to drive innovation in payments, lending, insurance and wealth management.