Net banking started as early as year 2000, and by 2002 most major international banks had started offering online banking services in some form. It’s clear that their digital transformation has undergone two strong decades of technological advancements.
For the banking, financial services and insurance industries (BFSIs), the transformation meant enabling SAVE-BORROW-PAY digitally. BFSIs were amongst the early adopters to consider cloud and build their strategy around the technology. In recent years, we have seen many international banks and FSIs move their system of engagements to cloud. However, with the complexity of regulations and compliance, operating outside a controlled perimeter, especially public cloud, has been challenging.
No wonder – as per a survey, 91% of financial institutions are actively using cloud services today (or plan to in the next nine months), yet only 9% of mission-critical regulated banking workloads have shifted to a public cloud environment.
But, there has been consequences as well: outages due to overloads, vulnerable security postures in a hybrid environment that are open to threats and the complexity of managing compliance as the storage and protection of data and challenges on integrating data sources, both internally and externally, have led to serious regulatory penalties, resulting in loss of business and reputation. This is perhaps why BFSIs are looking to renew the system-of-records and system-of-engagements, hosting them on a more secure, reliable, and better performing environment that can be scaled to support the dynamic nature of digital banking. All of these factors need to be considered, while keeping the compliance and adherence to mandatory regulations in place.
“While the move to cloud can now be much easier to contemplate for banks, it’s easier said than done – as two decades of IT, especially the system of records and traditional operating models at the back-end – are starved of modernisation band can not easily be lifted and shifted.”
The industry has evolved dramatically, as the open banking ecosystem is a now a key enabler for banks to streamline their digital business strategies. Banks are maturing their data monetisation and aggregation models, which allows the banking ecosystem players as FSI, suppliers and service aggregators to securely leverage banks data and services.
However, while we are talking about the open banking ecosystem – on the other hand, there is still emphasis on how data and transactions need to be protected and stored locally, under multiple different government and industry regulations.
Banks also have monolithic, large applications. However, the only way for banks to create competitive operations and differentiated digital offerings is by employing new technologies like AI/ML and blockchain, that will likely be cloud native. BFSIs will therefore find it hard to get the traditional and new systems working together in tandem. The modernisation of applications may therefore be a balancing act, as they will need to migrate complex applications to cloud leveraging containers for DevOps and CI/CD practices.
For a BFSI IT Delivery Manager, assurance on the back of application up time and performance is critical and key to delivering on IT promises. And traditional workloads do not always show the agility to respond to demands and peak loads. This is where a cloud-based, high availability zone can drive the IT assurance and agility promise. This is the story of digitally mature banks, whereas across the digital divide lie the smaller, co-operative banks.
The key consideration for all BFSI institutions is to identify and operationalise the right cloud strategy that can deliver assurance, agility, and resiliency. This should be a cloud strategy that enables a cohesive digital estate that is secure and compliant, and keeps the current IT investments safe while ensuring the platform can continuously innovate to offer new digital offerings.
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