Throughout the pandemic, millions of consumers in APAC have shifted from in-branch transactions to online or mobile banking. While initially this shift was born of necessity, it resulted in droves of customers discovering the speed and convenience that digital banking offers.
Many banks diverted investments from their branches to digital initiatives and overall banks performed heroically and offered a financial lifeline to people and businesses, exactly when and where it was needed. Technology, which pioneered new ways of working, clearly played a major role.
Now that digital banking has become mainstream, customers have greater choice than ever before. They also have high expectations, and will shop around for financial products and services that meet their specific needs. Therefore, it is more important than ever for banks to embrace core modernisation.
In APAC, new challenger banks that are extremely tech-savvy, innovative, and agile are entering the market. Unburdened by legacy technology and legacy thinking, they have redefined customer experience by becoming cloud native, data driven, and futuristic.
Meanwhile, incumbent banks often struggle with monolithic technology stacks and outmoded methods. They must now respond quickly, moving straight to digital and embracing the cloud – before getting outpaced by new fintech solutions from outside the traditional banking model.
Cloud native and digital first
Although not synonymous, cloud and a digital-first strategy are inextricably linked. Applications that are not cloud native tend to be inherently clunky, inflexible, and have limited potential. Conversely, cloud-native applications are normally designed to run in an infrastructure-as-a-service environment, which is stateless and technology independent.
Cloud also enables the use of modern methods, such as DevOps and microservices. These are real game changers that expedite development and provide the freedom to innovate, as well as the flexibility to accommodate change.
The cloud also brings other immediate business benefits to banks: Internal cost savings can be made, with a cloud solution consolidating several stand-alone applications and reducing high maintenance costs. The scalable infrastructure supports organic growth for banks, and ongoing regulatory and compliance changes can be adapted as well.
While there have been concerns in the past about the security of cloud, there are now solutions that offer the latest advancements in cloud security, monitoring, resiliency, and operational analytics.
In short, cloud empowers banks to move away from the hindrances and expenses of legacy infrastructure, and transform into an agile, efficient, and digital-first institution.
Modernising the core
With so much on offer, why have banks taken so long to embrace cloud? Banks, which are still reliant on legacy systems, often cite the high costs of transformation as one of the main reasons for holding back, along with any potential disruption caused by switching. However, the pandemic has changed consumer habits for good and banks can no longer wait.
Banks are already starting to use the cloud for peripheral applications, like content management and customer relationship management. However, true modernisation starts at the core, and then builds up and out from there. A bank’s core banking system constitutes the heart and backbone of its IT infrastructure and performs mission-critical operations like processing accounts, loans, payments, and securities.
Migrating “core banking” to the cloud is essential to reap the stellar benefits of modern technologies – AI, machine learning, data analytics, etc – all of which enable banks to build a better, more dynamic, and personalised customer experience.
Some banks may try to skate by with a mobile app stacked on top of ageing and inflexible technology infrastructure. The simple fact is that ageing architecture cannot flex. Eventually these banks will experience issues similar to those of organisations that don’t modernise at all. Banks should start from the bottom up, reinventing their core and launching digital-first, customer-first initiatives throughout their business models, technology stacks, software solutions, strategic plans, and more.
Meeting customer demands
In the digital age, technology is no longer limited to processing; it determines the customer experience and how your brand is perceived. To win new customers, it is critical for banks to offer a compelling customer experience from the get-go. Just like any other business, banks must seek ways to not only meet current customer wants and needs, but also to anticipate and address future requirements as – or even before – they arise.
Increasingly, the younger generations are becoming a crucial demographic to consider when determining what next-gen banking looks like. As this BCG research points out, digital banks Revolut and KakaoBank focus on serving the millennial segment, with strong personal financial management tools assisting with budgeting and saving. Additionally, UOB’s TMRW is a mobile-only bank designed to tap into the millennial segment of emerging banking markets.
The new generation of consumers are digital natives that prioritise fast, seamless, always-on banking experiences. Hence, digital and mobile tools are the new baseline for banking service, and no longer just a “nice to have”.
Banking on the cloud
Leveraging cloud for bank modernisation has become a strategic imperative. Banks need a cloud-enabled core that enables them to process in real time and operate in a customer-centric model so that they can interact with customers through all channels, 24/7.
Public cloud infrastructures are increasingly vital to facilitate the shift in core banking, and can help meet the demands of organisations wanting to deploy and easily expand their solutions across markets and verticals. There is no doubt that cloud will be a game changer for APAC banks’ digital transformation.