Enhancing Digital Experiences In Financial Sector With Cloud Technology
The financial industry is experiencing a profound revolution as more and more users embrace digital banking, preferring to forgo visiting physical branches entirely.
This paradigm shift has given rise to a new generation of digital-native alternatives, such as FinTechs and challenger banks, offering a wide range of comprehensive financial products. These groundbreaking solutions have the potential to completely supplant traditional financial institutions (FIs) for this specific customer segment.
Traditional banks must try to retain their customers and prevent them from switching to other options. Cloud technology emerges as a crucial tool in this endeavor. In this edition, PYMNTS explores the potential of cloud technology to enhance banks’ digital transformation while delving into the challenges faced by financial institutions (FIs) during its implementation.
The Benefits of Cloud Computing in the Banking Industry
In the realm of digital transformation, banks are increasingly turning to the cloud for many advantages. By embracing cloud computing, financial institutions can unlock enhanced data security, streamlined operational efficiency, seamless access to software applications, and unparalleled flexibility in adopting new technologies. The migration of bank data to robust cloud systems outshines the capabilities of traditional on-premises technology stacks, empowering banks to gain a significant competitive edge in the ever-evolving banking landscape.
The enhanced capabilities provided by cloud technology empower banks to achieve multiple objectives, including cost reduction, introduction of value-added services, and improved end-user experiences to foster customer loyalty. According to a recent survey, 44% of bank executives highlighted the cloud’s primary benefit as process automation, while 40% acknowledged its potential in facilitating the development of new products and services. Banks can unlock opportunities to streamline operations, foster innovation, and deliver exceptional customer experiences by leveraging the cloud.
Banks exhibit varying degrees of cloud integration, which are determined by their available resources and the willingness of their executives to embrace cloud technology. Among banks surveyed, 28% have migrated over 30% of their applications to the cloud, while 45% have between 11% and 30%. Additionally, 27% of banks have less than 10% of their applications cloud-based. However, despite these figures, over one-third of the surveyed banks acknowledged that they have yet to realize the business advantages their cloud investments offer fully. This situation likely stems from cloud integration’s challenges to the banking industry.
Challenges encountered during the implementation of cloud solutions
One of the primary considerations revolves around cost, as migrating to the cloud can be costly, and the tangible financial benefits may take time to become apparent to bank executives.
According to a recent survey, only 29% of banks reported achieving their anticipated outcomes regarding the speed and enablement provided by cloud implementation. Furthermore, just 35% of banks stated they could fully realize the expected value derived from their cloud migrations.
The unsatisfactory results can often be attributed to a need for more collaboration between banks and the IT firms they collaborate with for their cloud solutions. Banks must carefully select the appropriate IT partners to achieve successful cloud migrations. Banks should choose from the pool of IT companies that have successfully transitioned to the cloud, constituting 78% of the available options. Ensuring alignment of objectives between banks and their IT partners will be pivotal in shaping the future of cloud technology within the banking sector.
In conclusion, the financial industry is undergoing a significant transformation driven by the growing popularity of digital banking and the emergence of digital-native alternatives. To remain competitive and retain customers, traditional banks must leverage cloud technology, which offers numerous benefits such as improved data security, operational efficiency, access to software applications, and flexibility in adopting new technologies. Despite varying degrees of cloud integration among banks, many have yet to fully realize the potential benefits due to challenges and misalignment in cloud implementation. Selecting the right IT partners, preferably from the pool of successful cloud transition experts, becomes crucial for banks to overcome obstacles and maximize the advantages offered by cloud technology. By embracing the cloud and addressing implementation challenges, banks can streamline operations, foster innovation, and deliver exceptional customer experiences in an evolving banking landscape.
