As they continue to emerge from the 2008 financial crisis, manage the regulatory landscape, and navigate changing—and increasingly higher—customer demands, retail banks are turning toward cloud implementation to achieve greater flexibility, efficiency, and speed. With goals to help optimize legacy IT, accelerate the delivery of truly digital platforms, and help reduce costs, banks see cloud migration not only as a logical route to manage today’s IT complexities but, as a path toward business growth.
The competitive, digital-leaning banks we’re seeing in today’s marketplace put technology at the core of their businesses to create new models. They use digital technology to drive growth, adapt to market conditions quickly and frequently, and to help engage with customers on a simpler, more personal, and more relevant level.
Retail banks we refer to as cloud-native understand that connecting with customers requires embracing tools such as the Internet of Things, social media, intelligent automation, and advanced analytics. Cloud is the glue that holds these pieces together, facilitating agility to help meet volatile business cycles and elasticity to support high seasonality and on-demand consumption. Essentially, cloud optimization is one of the keys to unlocking a host of benefits, from improved cost optimization and predictability to heightened security and controls through automation.
Cloud adoption has introduced extraordinary opportunities for banks to transform how they conceptualize, develop, manage, and sell their products and services.
Which cloud model is right for your bank?
We see three options for retail banks moving toward this new digital state. Each of these models offers unique features and benefits depending on a bank’s legacy IT estate and long-term business goals.
Infrastructure-as-a-Service (IaaS) is a new cloud-based infrastructure model involving a shared pool of resources that could be rapidly configured, provisioned, and released as required. A non-disruptive, fast approach with minimal application transformation, IaaS can help save infrastructure costs that could lead to an overall cost of ownership savings of 20%.
Software-as-a-Service (SaaS) models enable a provider to offer completely managed end-to-end business solutions with low configuration and scalability. SaaS is best suited toward executing day-to-business functions such as customer relationship management, enterprise resource planning, IT service management, and human resources.
Platform-as-a-Service/Container-as-a-Service (PaaS/CaaS). Largely a model designed to build new architectures, PaaS/CaaS is recommended for banks that want to tackle microservice execution, big data and analytics architectures, new core banking services, or new IT services such as artificial intelligence, Robotic Process Automation, and Blockchain.
A new service model
To become truly cloud-native, banks should adopt a new service model, maximizing their current resources while independently deploying and scaling new services. This will better position them to be at the center of a host of new services and to be nimble enough to respond to continuously changing business requirements while rationalizing their current legacy applications portfolio.
Additionally, going native (particularly through the PaaS/CaaS approach) will drive greater value throughout the business with benefits that include:
Faster time to market
Bandwidth and confidence to place small and reversible bets
Agility to respond to business and technology shifts
A PaaS/CaaS model allows banks to provide a single, common repository of business components as well as technical services that can scale with business demand. Additionally, PaaS enables self-service for developers, expediting delivery of custom-built features.
The sooner, the better
Banks that are making cultural and capital investments in cloud infrastructure today are more likely to see greater payoff tomorrow. Payment services can advise on what their customers are buying, how much they’re spending and where. Banks are eager to consume more retail services from the ecosystem of other companies that they can monetize in differentiated ways as they expand their business and gain new customers.
Our recommendation to banks looking to achieve these outcomes is to begin building a business case early, update their governance and operating models, and create an alternative platform to deploy new services outside of the mainframe while consuming new services.
Redefining the industry
Cloud adoption has introduced extraordinary opportunities for banks to transform how they conceptualize, develop, manage, and sell their products and services. When used to its fullest advantage, cloud and all its attendant benefits have the potential to completely redefine what it means to be a financial services company.