Why cloud migration is critical for banks and fintechs

The global pandemic has brought about a metamorphosis across most industries as they change to adapt to current times. With various lockdowns and remote working becoming the norm across sectors, most organisations have had to transform their working ways, the banking industry, notwithstanding. Information is the lifeblood of the financial services industry, and despite being highly conservative owing to stringent regulations and governance, financial institutions today are looking at technological innovations to bring down operational costs and improve security.

Compared with developed economies, India's corporate banking sector is still in its nascent stage in terms of product and service offerings. However, Covid-19 and increased globalization has introduced a rare sophistication in offerings and has propelled digital adoption towards an upward curve. With even the traditional kirana stores now moving to provide e-commerce services online and people shifting to digital, it has become imperative for financial institutions to adopt a system that enables them upscale operations seamlessly.

With technology becoming an integral part of everything banking, financial institutions are now on the watch out to innovate and adopt the latest capabilities to lower costs, improve speed, expand market footprint whilst unleashing innovation.This is where a hybrid cloud model can help banks and financial institutions to remain competitive and relevant to their customers, while streamlining business processes and securing their data. With at least 30-40% enterprise adoption, India is gradually growing into a top hybrid cloud market.

Below are the ways cloud will expedite growth and adoption of fintech and digital banking within the eco-system:

Faster scalability

Besides supporting core banking processes, cloud offers a plug-and-play solution that enables to seamlessly add new features to it. It thus enables faster deployment of services through PaaS, and SaaS cloud services. Additionally, if an institution experiences an unprecedented surge in transactions, cloud platform offers the agility to scale up effortlessly. In a normal state, this would mean additional procurement and downtime until more capacity is built and deployed resulting in compromised performances.

Adoption of cloud thus offers scalability on-demand, which means one can expand and contract as needed almost immediately. This provides a far better capability to manage costs in line with user and business demands.

Cost reduction

One of the most significant benefits of cloud infrastructure is its potential to help banks reduce core costs, particularly those associated with delivering new solutions, besides overall operating costs. This is due in part to the fact that cloud helps evade costs associated with upgrading on-premises infrastructure, which can turn out to be extremely expensive and therefore unfeasible. It also makes on-premises infrastructure management redundant, enabling institutions to focus on value-added functions more closely aligned with their core business objectives. In the long-term, therefore cloud adoption can help banks enhance customer satisfaction and bring products to market faster, thereby maximising return on investment.

Agility and innovation

While legacy systems may have once played an integral role across businesses, they are now widely acting as inhibitors. A gradual transition to the cloud will enable increased operational efficiencies, while also providing the infrastructure through which they can begin to foster the same level of innovation as their cloud-native competitors. This will allow traditional banks to not only keep up with the changing technological landscape, but the ability to develop more innovative products and services on the go. It will also enable them to effectively cater to customer demands while competing with challenger banks. By implementing a multi-tenant PaaS on the cloud, banks will be able to offer state-of-the-art financial solutions to its customers including internet banking, online money transfer, ATM, and mobile banking at a much lower cost. Rural cooperative banks in particular can benefit from cloud technology as they can establish a robust banking operation to offer more customer-centric services.

Meets evolving consumer needs easily

Hybrid clouds can enable banks and financial institutions to tap into the public cloud to innovate quickly and address the needs of today’s demanding digital customers, while continuing to support data and workloads across different network environments.

With newfound confidence in cloud technology’s ability to address their security and compliance needs, banks can now extend their reach without losing focus of their core mission of serving customers. It will thus aid institutions to effectively address the needs of digital-savvy customers who expect timely and tailored financial services—whether the ability to manage their own assets, receive personalized financial advice or even obtain loans tailored to their individual circumstances. In other words, cloud technology can empower institution to become fully digitized leaders of the economy while maximising their potential.

Legacy systems are still largely important to many banks’ daily operations but moving to more agile systems is essential for growth and innovation. In today’s digital age, especially in the pandemic-driven remote-working environment, the industry will continue to build a more accessible financial world. Therefore, to ensure a robust digital infrastructure while adhering to best practices, cost optimisation and data security cloud migration will become imperative for banks and financial institutions.

Many are already realizing the value proposition of a hybrid cloud that can create a smooth path forward, enabling the meld of public and private clouds, along with on-premises infrastructure into a seamless system that can yield data insights without sacrificing security.

With so many benefits, banks and financial institutions just cannot afford to miss the cloud bus!

By Mandar Agashe, Founder, MD and Vice Chairman, Sarvatra Technologies