In 2024, financial institutions are under more pressure than ever to evolve. Consumers have grown accustomed to a smooth and frictionless omnichannel experience, with features like Apple’s Face ID making it possible to bank online without inputting a password.
This works alongside wider solutions implemented by future-facing banks, with the objective of improving customer experience and strengthening security. Indeed, Endava’s recent Retail Banking Report 2024 found that 46% of US respondents, and 44% in Europe, had already experienced the benefits of a cloud-based core for their FI.
While nervousness around implementation is understandable, with the core underpinning key functions of the bank, the proven benefits of adoption increasingly outweigh the risks.
Benefits of a cloud-based core
As the influence of fintech companies across the banking sector continues to increase, banks are facing more competition than just their traditional rivals. In the battle to attract and retain customers, technology and innovation will be crucial to improving their offering and survive in the market.
According to the Retail Banking Report, those surveyed found that the top benefits of adopting a cloud-based core included improved customer satisfaction (30%), stronger security (26%), and increased efficiency (26%).
However, as the size of the institution means different priorities, it also means different noticeable benefits. For smaller banks, due to their less expansive budget, cost savings are a priority. Though revamping the core of a bank may appear counter-productive to the money-saving objective, the removal of the need for on-site equipment is crucial to decreasing financial output in both the long and short terms. As well as the expense of the hardware itself, moving to the cloud can save energy and reduce operating costs.
In a society where data breaches are frequently topping the news headlines, it’s of fundamental importance to both brand-image and consumer-trust that companies protect the information provided to them, or collected by them, from their users. For medium-sized banks, adopting a cloud-based core provides them with the ability to quickly adapt to market demands, increase collaboration, and strengthen security.
Among the biggest financial institutions, those surveyed noted speed to market, improved customer retention, and scalability as their top benefits. Amid fierce competition for attracting and keeping customers, adopting a cloud core has given well-known banks the opportunity to prove commitment to both innovation and their consumer base.
Barriers to transformation
However, as with any digital transformation project, the suggestion is not always a popular one with many stakeholders accustomed to more traditional methods. 40% of those surveyed admitted that they have competing technical priorities to consider, 29% shared concerns about security, and 27% were hesitant due to the current economic climate.
This data suggests that temporary factors are the key areas of doubt for FIs, highlighting that while they see the value in adoption, this is unlikely to be an immediate switch across the industry. In contrast to more desirable external features, such as adopting AI capabilities or leaning into omnichannel, the cloud-based core has failed to be considered as a priority by numerous corporations.
Just over a third (37%) of respondents considered a top barrier to be their lack of technical resources to manage. With security threats ever-present, there is pressure on FIs to ensure the move to the cloud is completed with the relevant expertise, which adds to the pressure placed on a successful transition.
Route to success
When facing the overwhelming prospect of switching to a cloud-based core, there are several steps that banks can take to make the transition smoother.
With many wary of budgetary restraints, the idea of embracing a technology partner is often approached with reluctance. However, in the longer term, this investment can save money and decrease time spent bringing the new system to market.
Implementing and deploying new technology in a business should always be done with care, especially when it has the potential to impact the customer. It’s essential this is done quickly and efficiently, without any friction. Leaning on external support will enable banks to navigate the implementation hurdles, ensuring they have the correct technical resources and improving ROI in the long-term.
Embracing digitalisation
In a dynamic market, banks cannot sit still. They need to find new ways to surprise and delight new and existing customers. Many are placing emphasis on strategic priorities like increasing efficiency (46% see as a very high priority), improving digital customer experience (45%) and security (48%), and ensuring operational resilience (39%). To maximise the effectiveness of quick fixes like AI, Large Language Models, and Machine Learning, the core and underlying data must be in a sound and heightened state of readiness.
The benefits of switching to a cloud-based core align with the top strategic priorities shared by institutions; from customer satisfaction to increased efficiency and security. To remain competitive, banks must understand the value of embracing new technologies and feel empowered to create change.
