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Four imperatives to achieving successful cloud-based transformation in banking
Wed, 7th Sep 2022
FYI, this story is more than a year old

In the recent few years, we’ve seen how industries across the board, including the banking sector, have accelerated their digital transformation efforts to stay ahead and in tune with both consumer and business needs amid an increasingly hybrid world. Legacy and complex systems had to be quickly overhauled and bandwidth availability radically increased – these requirements specifically pushed banks to turn to the cloud and its extraordinary computational potential. 

Even so, cloud technology adoption among banks is still very much in its infancy. Despite the transformative benefits banks can reap from moving their services and applications to the cloud, a new study has shown that these very same financial institutions are slow to adopt cloud technology and still far from a full migration.

A recent report on the Future of Cloud in Banking revealed a major ambition across retail and commercial banks to triple the use of cloud by 2025 and migrate more client-facing applications and data. However, we found that an ambition and execution gap are two major obstacles to achieving cloud’s potential.  

Firstly, among the 250 senior banking professionals surveyed, over half of the executives and non-executives still undervalue the cloud’s transformative potential, thus limiting the business transformation ambition with the cloud. Secondly, they also believe that they lack execution speed and don’t fully benefit from existing investments due to security concerns and a lack of skilled talent.

For the banking sector to truly realise the potential and benefits of cloud-enabled business transformation at speed, there are four imperatives that banks need to consider as part of their cloud-based transformation strategies.

1. Align with business transformation goals

This starts with having a clear understanding of the value case, the contribution cloud-based transformation will bring to the business target state and the future operating model. 

Beyond just cost and savings, the value case will need to also look at three benefit lenses including: 

  • Enhanced performance: Faster speed of technology change, improved security, etc. 
  • Lower and variable cost: Lower IT run/change cost, increased automation of manual processes, improved risk assessment via unified data, etc.
  • Revenue generation: Data-led customisation of pricing/experiences, new products/services, more customer touchpoints with partner-channels, etc.
  • Once the foundation is laid, banks can then begin to define the integrated (business and technology) roadmap, including transformation goals.

2. Build enduring capabilities 

Cloud-enabled business transformation requires building capabilities in four key areas to ensure a more resilient organisation for the ages:

  • Modern engineering: Replace traditional engineering approaches with modern engineering principle and tooling. Key elements include end-to-end automation, self-services within guardrails, focus on speed, quality or value, and end-to-end responsibilities. 
  • Agile at scale: Many organisations continue to face challenges including being agile in name only, the complexity in scaling agile to hundreds of teams and the disconnect between senior executives and the rest of the organisation. These are challenges that need to be resolved to reap the agile-at-scale benefits.  
  • People and organisation: On top of upskilling existing staff, banks around the world are also recognising the need to expand their pool of engineers and data technologists. Upskilling people is more than just certifying people; they also need to learn the new platforms or languages, and how to work in a different way with agile at scale and modern engineering approaches. 
  • Governance: A common question is whether business transformation should be governed within or outside the existing company. Separating out the new build has its benefits as it brings in new approaches and ideas, while avoiding business-as-usual beliefs that conflict with longer-term transformation.

3. Rationalise, migrate, and modernise apps and data

The businesses and organizations of tomorrow will be data-driven by design, and this requires that organizations must have in place the right strategies to modernise the applications as well as the associated data in play. These include: 

  • Defining the target architecture, aligning that to the future business and operational model. Create logical domains, utilising domain-driven design principles, to sidestep legacy boundaries that could complicate future modernisation efforts, as well as create a common language for collaboration between technical and business design. 
  • Determining what happens with existing applications and data stores by using common methodologies including the 6Rs model or any treatment strategy.
  • Creating an integration hub as well as a migration hub to support a gradual and controlled migration and support multi-year efforts. 

4. Develop and scale enabling platforms

Pivotal to the new technology stack that supports the developing or altering of back-end systems is the creation of enabling platforms, including IAM (identification and authentication management) platforms, API/integration platforms, unified data platforms and cloud platforms.

The benefits of these platforms lie in the simplification for customer-facing engineers who need to create products and customer experiences, and the economies of scale in technology, control, and compliance on the back end. 

With this, customer-facing engineers can avoid being held up by legacy cumbersome control processes. Instead, they will be able to use standard patterns, and if they operate within the guardrails, they’ll be able to operate at speed. 

Done right, the cloud can be an extremely powerful way for banks to improve the customer experience, differentiate themselves and at the same time increase operational efficiency, and remain competitive.