Only by combining the best of internal and external capabilities can banks keep pace with customer demand in the digital age
What will the bank of the future look like? How will it interact with clients and its financial counterparties? Where will it store its data? What will its unique selling proposition be?
Predictions are always difficult, but it seems certain the cloud will shape the answer to these questions. Already over the past decade, cloud services have experienced a massive take-up by making it cheaper, quicker, easier and safer to access many technology-based capabilities and services.
Open up horizons
The cloud not only opens up our horizons to new offerings, but also allows us to re-evaluate what we do ourselves, without the need to outsource to third-party specialists. In many cases, the biggest opportunity is to refocus our time, energy and resources to where they have most impact: on our customers.
Indeed, the benefits of the cloud to the business of running a bank are not that different to those we enjoy in our personal lives. Many of the apps we use day-to-day interact with functions, services and data accessed via the cloud. We use this technology to store, share and source documents, photos, calendars, music and many other digitised artefacts. Our apps’ new functionalities and security updates are now available automatically or at the touch of a button, drawn down from the cloud. Put simply, we can be more efficient and effective because many of the administrative burdens of life are being lifted into the cloud.
A new modus operandi for banks
Similarly, banks can use the cloud to focus on adding value to their clients, adapting nimbly and cost-effectively to fast-changing expectations and opportunities. By sourcing supporting services from the cloud, banks can deliver more tailored value propositions to clients at scale and at speed, while minimising the operational overheads that come with ‘on premise’ installation. Collaboration with suppliers and partners in the cloud means banks can direct more of their time and resources on delivering the services expected by a new generation of clients: digital, innovative, responsive, easy to use and always available. Further, cloud-based partnerships can help banks broaden, refine or augment their existing value proposition, becoming not just a manufacturer but an aggregator of services.
This is a change from banks’ traditional ‘modus operandi’, but an ever-more necessary one. The uncertainty and unpredictability of the current competitive environment requires more scalability, flexibility and agility. Banks must launch new services or quickly scale up existing ones while reducing total cost of technology ownership, minimising installation, upgrade and maintenance requirements. Only by combining the best of internal and external capabilities can banks keep pace with customer demand in the digital age.
Cloud-based partnerships are a change from banks’ traditional ‘modus operandi’, but an ever-more necessary one. The uncertainty and unpredictability of the current competitive environment requires more scalability, flexibility and agility.
A question of balance
Still, security, privacy and control are important principles in the financial sector, which may explain a slightly slower cloud adoption rate than other industries. However, today’s open and collaborative business environment requires banks to catch up and be innovative and responsive to the digital requirements of a new generation of customers.
Because the mission-critical systems and platforms on which financial services rely must be resilient, available and secure, banks typically started their cloud journey by sourcing services across private networks provided by entities with a proven track record in operational excellence, such as SWIFT. The maturity of the sector is reflected in that fact that private and community cloud options are increasingly being supplemented by public cloud providers that have rapidly developed the robust infrastructures and deep levels of resource and expertise needed to support finance sector users.
Adoption of public cloud is in its early stages, but expected to grow. A new Aite Group report estimates the majority of top-tier buy- and sell-side firms currently host up to 10% of their total technology stack in a public cloud environment. This slower adoption reflects a commitment to customer security and operational excellence among financial service providers. Nevertheless, a survey conducted for the report lists cost drivers, scalability, data storage, and time-to-market as factors encouraging greater use.
Driving innovation and value
The cloud is a central pillar of the digital economy, driving innovation and value. If you were building the bank of the future from scratch, you would not even contemplate doing so without it. For incumbent banks, the challenge is how best to harness cloud-based and internal assets to stay ahead of the competition while delivering best-in-class service.
'To learn more about SWIFT's interfaces and integration solutions, click here.