Cloud is the future for Banking... | NTT DATA

Mon, 15 November 2021

Cloud is the future for Banking

But getting there is not easy

Retail banks are moving to the Cloud because they have to. They have extremely complex IT environments, a huge amount of legacy debt and are being outflanked by faster-moving, low cost, digital native challenger banks. 

Cloud promises a lot of benefits. An end to high levels of capital investment. Much greater agility in developing new products and services. Faster time to market. Access potentially to global markets. Low fixed costs. 

Sounds good, but the reality is more ambiguous. 

  • Moving to cloud represents a disruptive- and costly- change project. It takes time, lots of it, and plenty of money, too.
  • The cost benefits of Cloud are real, but you can’t materialised them until the full migration has been completed. 
  • Until then, costs will actually be higher, as you have to pay for legacy infrastructure right up to the moment when it can be turned off. 
  • All the way through the process of change, you need to manage smooth integration between legacy and new Cloud processes, while satisfying regulatory requirements. 

It’s a difficult road, to be sure, though banks still have to do it, like it or not. Trouble is, by the time they have navigated their way through this complex process, those “born on the web” challengers may be further ahead than before, with a gap that it will be hard to bridge. 

So what to do? In this first blog post, let’s take a look at the benefits banks are looking for, and the challenges they have to face.

Unlocking the benefits

Successfully moving to Cloud delivers four essential benefits to Banks. 

  • Scalability, keeping pace with fluctuating demand without having shortfalls or underused assets. Projects can be launched more or less at once and pay per use keeps costs in line with demand. 
  • Cost reduction, because public Cloud is a shared platform, kept at best practice level by the provider. IT investments will drop almost to zero and fixed costs will go down, as well. 
  • Agility will be enhanced at once, with projects now needing much shorter lead times, giving banks the ability to test markets and change direction at speed. 
  • Innovation should become much easier. Cloud enables creation of collaborative virtual working spaces, where other ecosystem partners to develop and test on near production environments, cutting risk and speeding time to market. 

Everyone wants the benefits, but the reality is a little more nuanced and complicated than it may at first seem. 

Facing the challenges

That’s because moving to the Cloud comes with challenges, as well as benefits, and no bank can gain competitive advantage until the challenges are successfully faced and overcome. 

  • Applications evolution. Banks need agile applications development to profit from IT agility. They need to redesign processes and create a new applications architecture optimised for cloud, which is a big undertaking.
  • Banking cost savings. Costs are usually higher during transformation because banks have to support the existing legacy infrastructure while at the same time investing in change. Cost benefits don’t fully appear until legacy is decommissioned. 
  • Governance. Banks need new methods for security and compliance, once data, assets and applications are no longer hosted on their own premises. That means new systems to cover everything from interoperability to data sovereignty, regulatory compliance and oversight of multiple cloud providers.
  • Complexity. During transformation, banks systems must manage legacy, while interconnecting with cloud-based operations, mapping points of connectivity and potential weakness, scrutinising and reporting in real-time, without interruption.

Banks need a roadmap to Cloud and, above all, they need a proven method for keeping costs low and monetizing Cloud benefits fast. We need to make the transition to Cloud as painless as possible, removing risk along the way and looking for ways to deliver financial benefits long before the migration is complete. 

In our next blog, we will explore some of the ways in which we can help banks to accelerate change and use standardised products and components to monetize Cloud earlier than ever.  


How can we help you?

Get in touch