The financial sector has had cloud available for years, so why haven’t they done more with it?
The past decade has seen much talk of ‘the cloud’. Across all industries, we’ve seen articles, webinars, and entire events dedicated to explaining and promoting the value cloud computing can bring to the world of commerce.
For financial institutions in particular, the cloud has been positioned as a gateway to a world of innovation, modernisation, and transformation. A detailed review of cloud cost-optimisation levers and value-oriented business use cases foresees more than $1 trillion in run-rate EBITDA across Fortune 500 companies as up for grabs in 2030.
But for all the promises of revolutionary new business models which will take the industry into unrecognisably game-changing territory, there is today a lingering feeling of possibilities unrealised and expectations unfulfilled. It is evident from industry adoption that the sector needs to move faster and already have scaled systemic adoption of the cloud by now.
Why hasn’t it, and what can be done to drive meaningful, sustainable acceleration?
What does the future of banking look like?
The accelerations and disruptions driven by the global pandemic of the last year have significantly informed how top thought leaders see the decade ahead for financial services players. In a recent series of reports and webinars around the Future of Banking, Forrester predicted that by 2030 banks will be:
Invisible. The smart use of technology (including deep-dive advanced analytics, APIs and 5G) will enable leading banks to embed financial services at the customers’ moment of need, through the medium they need. Although this should open up more consumer business, it will come at the expense of brand visibility.
Connected. In an evolving technology eco-system of institutions, regulators, technology providers and fintechs, partnership and collaboration are the future; intermediation of the bank brand is an inescapable part of the future. Being the ‘trusted advisors’ in such relationships, banks will be able to put themselves at the heart of frictionless, rich customer journeys.
Insights driven. One of the recurring ideas in this Forrester research is that trust is at the heart of future consumer success. Banks will confidently step up with advice and generate financial intimacy with their customers who expect ‘return on consent’ for that trust.
Purposeful. The events of the last year have firmly (and probably irreversibly) taken Environment Social Governance (ESG) to the boardroom as formal targets to strengthen branding and reflect values that resonate with consumers’ hearts and minds. In addition to preferring banks that align with their environmental and social values, consumers will expect open innovation and engagement, generating collective product development to benefit all.
The Forrester thinking goes on to suggest that banks will need to carefully choose their key battlegrounds – some will want to become de facto ‘technology companies’, others will want to double down on ‘owning’ the customer through trust, understanding and personalisation.
What’s not in any doubt is that cloud technology has a critical role to play in all of this. The cloud empowers modernisation of core infrastructure, meets rapidly changing consumer behaviors and expectations, and drives business growth – all while supporting the most stringent security, compliance, and regulatory requirements. It enables flexibility, fully automated systems, and on-demand capacity provisioning. Taken together this will mark the advent of the era of ‘financial functions as a service’.
But most banks will see these aspirations as getting ahead of themselves. A recent McKinsey article around technology-led shifts and opportunities identifies exactly how established banks and payments providers need to deal with three areas of legacy technology: infrastructure and deployments, middleware ecosystem, and front-end channels and execution systems.
Banks are having to ask themselves difficult questions around whether their current infrastructure can adapt to incoming regulatory and institutional changes; for example, real-time payments, new messaging standards, more stringent requirements governing risk, fraud, and privacy. With an increased focus on analytics (particularly of clients), risk, client experience, the use of AI and blockchain/digital assets, the conditions are ripe for those financial institutions able to innovate effectively. Once again, all roads lead to the cloud.
Partnering for innovation
In the world of banking and capital markets, the need for speed and agility have been two of the main drivers in cloud adoption. As ‘pay for what you use’ models are fast becoming an industry standard, the ability to scale up and elastically spin down on demand is becoming critical. Most FIs have understood, through internal advisory assessments, that the ability to innovate, develop, and consume IT services on demand – such as business applications, data storage complemented by purpose-built data stores that offer valuable insights and just in time, and processing power – have hugely positive effects on their ability to scale and grow beyond what they ever thought was possible.
Putting cloud right at the centre of their thinking enables financial institutions to re-architect for the pace of innovation and put the focus on systems that directly benefit their end customers.
The cloud simply offers far more for far less than any of its on-premises counterparts. However, making the switch, or for some, making the switch and then keeping momentum, can prove to be tricky. As firms continue to develop their cloud capabilities, they still need to charter a sustainable path from on-premises to cloud to true cloud computing banking.
Many in finance commence their migration journey alone. Their internal teams know their business’s application landscape and they are mostly confident with what the public cloud can offer them. Most gain early success through PoCs or start seeing cost savings through small application migrations.
Then the journey begins to stall.
As applications become more complex and dependencies become harder to trace, the operations team struggle to fully unlock the value of the cloud and get stuck, neither truly adding value nor delivering on transformational promises. Steering their path independently, financial institutions miss out on the best practices like Cloud Adoption Frameworks and Cloud Economics Assessments that have proven results. This is perhaps the most common reason why FIs have had the cloud for years but have done so very little with it.
For financial institutions to truly accelerate, they need to be able to leverage the ecosystem of expertise to right-train the organisation and strengthen their organisational muscles around cloud services. This includes leveraging available frameworks that are proven in the industry, and accelerators from specialist integrators that can deploy at speed.
To overcome the pitfalls, institutions that are already on a cloud migration journey, or are about to embark on, one should consider working with a migration partner-managed services provider that can provide them continuous optimisation along the way. Migrations can take the form of mainframe or data centre migrations or hybrid architecture, in which some on-premises infrastructure is combined with cloud services such as analytics or AI.
Take the work DXC and Amazon Web Services (AWS) do together to ensure financial institutions get the most from their cloud computing initiatives. DXC Cloud Services for AWS works with firms’ internal staff to design, deliver, and provide daily operational support of compute, storage, and virtual network infrastructure with AWS cloud. DXC works explicitly with financial institutions to monitor and manage system software and infrastructure configurations, and their financial and governance services help reduce uncontrolled consumption.
For those just about to embark on their cloud journey, DXC supports properly configuring and managing an AWS environment, meaning as a bank starts to embrace the cloud, they do so with the help of a trusted and experienced partner that understands AWS best practices and resolves outages.
Having experienced partners by your side helps you understand which applications are delivering business value, and how moving those applications to AWS will impact the business. Partners can also help you understand which cloud operating model best fits your needs. Whether you’re going public, hybrid or multi-cloud, clearly understanding the benefits and limitations of each will help you make business-relevant decisions that drive strategic value to your internal and external operations.
Reducing costs with a cloud-based consumption/utility model
DXC delivered transformation in digital customer engagement for a major life insurance organisation based in Sydney, Australia – all fully powered by AWS cloud.
Their existing call centre operations were based on a high fixed price model, with poor agent and customer experience, manual reporting, and no provision for real-time reports or visualised dashboards. The physically hosted legacy solution involved many complicated call flows and IVR.
The organisation needed a modern customer engagement platform that aligned to the organisation’s principles of consumption-based operating expense, the elimination of fixed costs and technical debt, and the provision of a contemporary customer engagement experience enabled by modern technology, such as cloud-based operations, artificial intelligence (AI), and flexibly configured application content that could be deployed at pace and scale.
DXC implemented a solution around Amazon Connect with Nimbus workforce optimisation, delivering core system integration, AI speech-to-text transcription, real-time reporting/analytics and metrics. The benefits to the client included real-time personalisation of customer engagements, agent productivity benefits, and workforce management; it delivered 100% call quality assurance for regulatory compliance and quality management with calls screened automatically.
As well as delivering on customer experience, the transformation project began the invaluable work of cost optimisation for the client. In today’s life insurance market, carriers are obliged to tackle the increasing burden of regulatory oversight and reporting. This means it’s a perennial challenge to find ways to minimise compliance cost through automation.
The Chief Technology Officer of the Australian life insurance organisation said:
“DXC took us from a legacy solution and moved us to a cutting-edge cloud platform that provides better customer and agent experience with the economic benefits of a fully consumption-based commercial model. The business will achieve much-improved customer engagement together with higher levels of digital quality assurance to meet regulatory obligations.”
This is an example of how financial institutions can begin to deliver on the future with invisible, insight-driven banking and capital markets services.
Banking on success
Successfully deploying cloud computing in banking isn’t a mystery or an anomaly. As we’ve hopefully made clear in this article, there are guided steps and partners financial institutions can work with to make the most of what the cloud can offer them. We are working with two banks – a leading US bank and a British multinational financial services company – which both stand out as stellar examples of financial institutions that are leveraging the tools available to them to make the cloud work harder for them than ever before
Before diving into some of the great work these banks are doing, it’s important to note that their recipe for success can be summed up in four easy steps:
- Both banks are making the best of the tools that are available to them through DXC and AWS.
- Both banks are pulling levers and constructing feature-based releases.
- Both banks are taking advantage of elastic and flexible development, moving their software to a pay as you go model.
- Both banks are using AWS differentiators to learn from others without making the same mistakes.
Leading US bank
One of the leading banks in North America is using cloud computing to drive app refactoring, AI and analytics, and bring intrinsic security to everything it does. Of particular note is the fact that this bank is leveraging Amazon SageMaker to train machine learning algorithms and develop new services. The results of this have been incorporating natural language processing to make client interactions more personalised and improve their customer service management in their contact centres.
Additionally, the bank’s engineers work closely with AWS on hackathons, where they can decompose applications and migrate workloads. This process helps the organisation uncover problems and gain institutional knowledge, as well as increase overall collaboration across the organisation. By working closely with AWS, this leading US bank can develop repeatable blueprints that help their developers architect modern applications in a safe repeatable environment, using the depth of AWS services.
The sky’s the limit.
A British multinational financial services company with a global mission is collaborating with AWS to drive its digital transformation and deliver new personalised banking services in its 60 markets worldwide.
As regulatory compliance increases in complexity, the company leans on AWS to improve resiliency, security, and privacy, while meeting compliance requirements across the bank’s global footprint. The company’s CTO recently acknowledged this, stating that the adoption of a cloud-first approach makes its vision for next-generation financial services – such as open banking and next-gen payments – a reality.
British multinational financial services company
Making sense of cloud computing is neither simple nor straightforward; complexity, confusion, and competition can distract financial institutions from being able to truly benefit from it. Yet the ultimate goal of ‘seamless simplicity’ remains. AWS and DXC together are unlocking agility, cost reduction, and operational resilience for financial services companies. We can support you in achieving more predictable outcomes for your business that drive better features for your customers and attract the right talent.
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