Three Key Benefits of Banking in the Cloud

July 4, 2017

In July 2016, Bloomberg reported that at least 25 of the world’s 38 largest financial institutions and insurance companies had signed up with Microsoft to begin putting applications into the cloud.

For an industry that has, until recently, been rooted in cumbersome legacy systems, this was a seminal moment.

12 months later, both established banks and challengers are hurrying to get into shape for PSD2, Open Banking, and a host of other initiatives that are designed to shake up the financial services market.

At PCT, we think that effective adoption of the cloud could be a pivotal factor in deciding who emerges on top and who falls behind their competitors in this new age of digital banking.

With that in mind, here’s three key benefits of banking via the cloud that can help financial service providers of all shapes and sizes thrive in today’s rapidly-changing market.

Cutting costs

One of the classic market entry barriers for prospective new customer-focused banks has been the high set-up and operating costs associated with establishing a new financial institution.

But operating via the cloud can dramatically reduce expenditure for challenger banks and traditional retail banks in several important areas.

By working with a cloud service provider’s already-established SaaS infrastructure, banks can avoid expensive overheads for the development of datacentres and servers. Capital One is increasingly hosting more of its software in Amazon Web Services (AWS), and is on target to reduce its number of datacentres from eight to three by 2018.

The benefits are twofold: Firstly, banks can stop paying for the construction and management of such infrastructures. Secondly, they can shed staffing and training costs required to operate them, enabling a more focused allocation of resources to product innovations and other competitive advantages.

Further, Likhit Wagle, General Manager of Global Banking and Financial Markets, IBM, estimates that cloud-based models could save up to 40% on annual operations and information-technology budgets by stripping away redundant technologies.

Deliver innovative new products quickly

The traditional banking industry is not famous for being agile and responsive to changing customer demands. In fact, non-cloud based applications can take upwards of 18 months just to get to prototype stage, by which stage market conditions may have changed, or more nimble products may have overtaken it.

With UK mobile banking transactions expected to more than double by 2022, however, this is not an option for financial service providers. In today’s competitive market, they must cater for a new generation of digitally-savvy consumers by quickly delivering innovative digital banking products.

Ohpen, a Dutch company that provides banks with a modular platform for administering retail mutual funds and savings accounts for consumers, has deployed its solution entirely on the AWS cloud.

The decision allowed them to deploy new features in three months or less, compared to a year or more using traditional IT, and company leaders estimate that their institutional customers can save up to 80% in IT costs by using the Ohpen platform in the cloud.

Improve flexibility and scalability

In today’s unpredictable PEST environment, which includes Brexit and recent political uncertainty in the UK, it is crucial for banks to remain flexible and scalable to meet fluctuating market conditions and trading surges while protecting their income. Again, the cloud represents the ideal solution.

The cloud’s elasticity means that businesses can quickly scale up their processing capacity for peak trading periods, including increased credit card spending on Black Friday, Prime Day etc, without purchasing new servers just to cope with such isolated incidents.

The cloud is also the perfect partner for new challenger banks that want to quickly and cost-effectively make an impact on a large target demographic.

In November 2016, An Post, Ireland’s largest postal service provider, entered the financial services market as the first customer of bank.VISION, PCT’s proprietary cloud-based digital banking platform.

An Post used bank.VISION to deliver banking-grade financial services on a national scale, across 1,100 An Post branches nationwide to a potential 1.7 million weekly customers. This would not have been possible without the omnichannel, banking-grade capability of bank.VISION, which enabled An Post to quickly deliver a proposition fit for all the citizens of Ireland.

A solution for the digital age

Recent research from IDC Financial Insights suggests that approximately 66% of global financial services firms will be using cloud services in a significant way by next year, saving billions of dollars in the process.

As a stream of new market entrants divert these savings into dynamic, customer-centric new products and services, banking leaders must ask themselves whether they can truly remain competitive in such a streamlined environment without harnessing the power of the cloud.

Further, the benefits outlined in this blog represent only a handful of the advantages of banking in the cloud.

PCT will be joined in discussing more of these details by speakers from Microsoft, Unisys and BJSS at Building a Digital Bank, the first of our PCT in Action conference series.

The educational networking event, which takes place 10:30am-13:00pm, Tuesday 11th July, at Brand Exchange, 3 Birchin Ln, London, EC3V 9BW, will explore how businesses can best utilise cloud-based technologies to deliver banking-grade services to their customers.

To secure your place at this not-to-miss industry event, please register here.

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