The Benefits of Cloud-Native Banking Infrastructure

cloud-native infrastructure in banking

The cloud has become a mainstay in businesses in all sectors as a way to innovate in and streamline business operations. Like other industries, banks and credit unions have recognized the value of the cloud for improving user experiences, as well as the bottom line, and many are taking steps to adopt cloud infrastructure.

But updating decades-old legacy systems isn’t just about moving systems into a patchwork of on-premise legacy technology combined with cloud-based software and databases. Getting the most out of the cloud means developing a truly cloud-native infrastructure — one that is built, hosted and managed completely in the cloud.

As the banking industry continues its digital transformation, cloud-native infrastructure and applications will become increasingly powerful tools in enhancing user experiences, improving technological agility, increasing cost savings and boosting innovation.

Cost Reductions and Improved Cost Predictability

The software updates, server maintenance and upgrading of hardware that legacy and cloud-hybrid IT systems require can impose a significant financial burden, especially when considering the costs of specialized staff to perform these crucial tasks. 

Cloud-native architecture, however, is designed to continuously update and maintain all aspects of the infrastructure automatically, which reduces personnel costs. It also is much easier to update and replace cloud-native components without having to reintegrate or replace costly legacy systems. Expenses stay consistent because upgrades are included in the cost of the platform. 

Similarly, cloud-native infrastructure includes auto-scaling, which allows businesses to reduce or increase computing resources as they are needed and only pay for what is used. This can result in immense savings during slower periods of activity, such as non-banking hours.

These savings have far-reaching effects on the overall bottom line. Research conducted by Capgemini shows that 83% of cloud-native leaders consider themselves ahead of their peers when it comes to financial performance, and 84% stated that going cloud-native has helped them increase revenues and cut operating costs.

Stronger Compliance and Security

Compliance and security are two of the most-significant impediments when it comes to digital transformation in the financial services industry. Cloud-native infrastructure provides a simplified approach to both by automating the integration of both new threats and new regulations automatically to ensure seamless data security and compliance. 

Data analytics allow anomalous behavior and other threats to be detected and prevented in real-time before they have a chance to develop into serious security issues. With cloud-native architecture, updated, real-time compliance and security are built into the infrastructure and applications proactively and automatically. Cloud-native applications are also designed to support modern data storage, processing, usage and sharing, making it easier for stakeholders and regulators to access and examine information.

Enhanced User Experiences

A 2017 study from the World Retail Banking Report found that non-traditional banking and fintech firms are outpacing financial institutions that have maintained a more-traditional approach when it comes to the growing, digitally native user base of Gen Y. Older generations are also becoming increasingly tech-savvy, making it imperative for banks and credit unions to expand and improve their digital offerings to meet the demand for personalization, comprehensive services and speed. The recent events regarding the global pandemic have accelerated these needs, as many users find themselves relying on app-based and online banking more than ever before. 

Cloud-native infrastructure allows banks and credit unions to be more agile when developing and implementing new services for users or improving existing ones. With all aspects of service on the cloud, banks and credit unions can consolidate and integrate them to provide a customized, seamless, end-to-end experience for all banking needs on a single platform. In fact, when asked how a cloud-native infrastructure has affected users, 87% of respondents to Capgemini’s study stated that it has enabled them to provide a better experience to their users.

Development Speed

Legacy and cloud-hybrid systems can be slow to evolve and often have lengthy production cycles, making them inflexible and unable to adapt quickly. Many of these issues arise from inconsistencies and incompatibilities between the various physical and cloud-based elements.

With cloud-native applications and architecture, development becomes faster, more flexible and more agile as all aspects of the system become fully integrated with each other. In fact, 88% of cloud-native leaders say that it has improved the agility of their organization

It’s clear that banks and credit unions that take advantage of this speed can obtain a significant competitive advantage in a rapidly changing environment. Applications can go from development to testing to approval to production in a matter of days or even hours, rather than weeks or months. This means less lead time for developing new products and services, as well as an increased ability to be rapidly responsive to the fast-changing needs of users. 

The cloud has become the go-to space for building applications and streamlining business operations. However, unlocking the full benefits of cloud computing in banking requires a cloud-native infrastructure and cloud-native applications that allow banks and credit to build new applications, get more value from existing applications and adapt to modern best practices in a digital world. 

Ready to discover how your financial institution can benefit from Lumin Digital’s cloud-native banking platform?

References:

  1. World Banking Report. 2017. https://worldretailbankingreport.com/
  2. Cloud Native Comes of Age in Banking. Capgemini. 2018. https://www.capgemini.com/wp-content/uploads/2018/01/cloud-native-applications_banking.pdf