Most read
Pros and cons: Working in the gig economy...
Pros and cons: Working in the gig economy...
Latest Podcast
Is the market overheating; should ETFs take your fancy, and what’s happening t...
Is the market overheating; should ETFs take your fancy, and what’s happening t...
Resources
There is $17.5 billion in lost and unclaimed super across ...
There is $17.5 billion in lost and unclaimed super across ...
Borrow
Why cloud is the future for banks
The rise of neobanks, alternative finance providers and a vibrant fintech start-up scene in Australia and New Zealand is driving significant investment in cloud-based infrastructure for traditional banking institutions. Our recently launched Culture of Innovation Index found that at a global level 92 percent of corporate banks are either already making significant use of the cloud, or planning to make further investments next year. Locally, banks are expected to invest 5-10% of their resources in cloud-based services in 2020, a figure that continues to grow year-on-year.
Why cloud is the future for banks
The rise of neobanks, alternative finance providers and a vibrant fintech start-up scene in Australia and New Zealand is driving significant investment in cloud-based infrastructure for traditional banking institutions. Our recently launched Culture of Innovation Index found that at a global level 92 percent of corporate banks are either already making significant use of the cloud, or planning to make further investments next year. Locally, banks are expected to invest 5-10% of their resources in cloud-based services in 2020, a figure that continues to grow year-on-year.
Banks realise that the cloud enables them to offer new services to their customers, improve overall customer experience and react to market demands more quickly. Coupled with the understanding that cloud and hybrid cloud environments can be configured to meet the required regulatory and security standards, banks realise that cloud capabilities are becoming table stakes for financial institutions that are looking to innovate.
Better customer experience through faster deployment
Mobile commerce and seamless digital customer experience have become central to business success in the past ten years, with consumers and merchants expecting real-time service and intuitive usability. Neobanks and fintechs – most of which were born on cloud infrastructure and focus heavily on user experience – are challenging the big four, adding further pressure on the incumbents to innovate and add value for customers.
Incremental improvements or minor value-added services, such as offering basic spending insights and categorisation, is no longer a unique selling point for customers. Banks need to think bigger about the services and tools that will be true game-changers. For example, data-driven insights can be used to provide timely notifications to customers about their spending habits, helping them to stay on budget.
It’s important to remember that entering the cloud is the means and not the end – however it’s the first step on this journey towards improved customer experience. Banks can reallocate time and resources that were traditionally spent maintaining IT infrastructure to activities that will delight customers. It also enables greater collaboration with fintechs and startups, streamlining IT integration through the use of Application Programme Interfaces (APIs) that fintechs can connect to more easily. This enables banks to offer a greater range of complementary services that strengthen both parties’ collective offerings.
Streamlining operations and scaling for agility
Banks traditionally run their own data centres which can be costly, resource-intensive and difficult to scale.
To illustrate, imagine a scenario where a bank is looking to expand operations into a new country or territory. Historically, banks would look to buy new data centres to ensure their network could handle peak demand. However, banks were spending millions of dollars to run and maintain data centres that are only partially utilised. Further scale had to be built into these operations, which may not be achieved in the short term.
This model of operation is highly inefficient, as the infrastructure needs to be ready to handle peak demand from initiation onwards, even if the volumes are usually significantly lower.
Using the public cloud’s ‘operating expense’ (OPEX) model, where services can be scaled up and down according to demand, provides much greater flexibility and cost optimisation. This model also empowers banks to focus resources on customer experience innovation and quicker product iteration, rather than backroom maintenance.
There has been some initial hesitation on the part of banks to adopt the cloud as it requires moving sensitive data to a new environment, which is perceived as opening up security vulnerabilities. Importantly, regulatory bodies needed to be engaged to ensure compliance of these systems. However, banks increasingly understand that the big cloud providers spend more on security than banks could on their own. And these cloud providers can also engage national regulatory bodies and provide a holistic view, based on their experience in a range of markets globally. Furthermore, hybrid cloud environments, which combine the benefits of a public and private cloud, allow institutions to leverage a ‘best of both worlds’ approach.
Adopting the cloud enables banks to offer better user experiences, increase the pace of innovation and streamline operational cost: essential ‘must-win’ areas for banks with the rise of nimble neobanks and agile fintech startups.
By: Phillip Finnegan, Managing Director – Pacific, ACI Worldwide
Banking
Big banks push for BNPL regulations
The success of consumer take-up and the ease of credit provided by the buy now, pay later sector have seen the major banks renew calls for tighter restrictions on their products, an inquiry heard. ...Read more
Banking
Citi to exit consumer banking in Australia
US investment bank Citigroup has announced that it is pursuing an exit from the Australian market after 36 years. ...Read more
Banking
Westpac faces civil proceedings
The corporate regulator has commenced civil penalty proceedings against Westpac alleging the big four bank used misleading and unfair sales of consumer credit insurance. ...Read more
Banking
CBA to pay $7m penalty for overcharged interest
The Commonwealth Bank of Australia has been ordered to pay a $7 million penalty for charging an interest rate on business overdraft accounts that was substantially higher than what customers were advi...Read more
Banking
CBA taken to court over banking fees
ASIC has commenced civil penalty proceedings against the Commonwealth Bank of Australia, alleging that it charged clients millions in monthly fees when it was not entitled to do so. ...Read more
Banking
Big 4 bank offers $10m in grants to flood-affected customers
A big four bank has launched a $10 million Flood Support Fund to provide grants to customers and businesses in flood-affected areas. ...Read more
Banking
Guide to NSW flood financial aid: From the banks to insurers
The banks are offering customers affected by the NSW floods loan repayment deferrals, among other forms of financial aid, while the Insurance Council of Australia has declared a catastrophe for much o...Read more
Banking
APRA drops big 4 money laundering case
APRA has followed ASIC in closing its investigation into Westpac over the AUSTRAC scandal, which led to the largest corporate fine in Australian history. ...Read more
Is the market overheating; should ETFs take your fancy, and what’s happening to the low and middle income tax offset?
Listen now
Home values up 30% (or are they); NFTs taking the world by storm, and why Keating thinks Aussies will be ‘poor’ in retirement
Listen now
Raging floods, the tech stock bubble and the ongoing SG debate
Listen now
Meet the Manager with Trilogy’s Philip Ryan: RBA rates and property price growth
Listen now
Banking
Big banks push for BNPL regulations
The success of consumer take-up and the ease of credit provided by the buy now, pay later sector have seen the major banks renew calls for tighter restrictions on their products, an inquiry heard. ...Read more
Banking
Citi to exit consumer banking in Australia
US investment bank Citigroup has announced that it is pursuing an exit from the Australian market after 36 years. ...Read more
Banking
Westpac faces civil proceedings
The corporate regulator has commenced civil penalty proceedings against Westpac alleging the big four bank used misleading and unfair sales of consumer credit insurance. ...Read more
Banking
CBA to pay $7m penalty for overcharged interest
The Commonwealth Bank of Australia has been ordered to pay a $7 million penalty for charging an interest rate on business overdraft accounts that was substantially higher than what customers were advi...Read more
Banking
CBA taken to court over banking fees
ASIC has commenced civil penalty proceedings against the Commonwealth Bank of Australia, alleging that it charged clients millions in monthly fees when it was not entitled to do so. ...Read more
Banking
Big 4 bank offers $10m in grants to flood-affected customers
A big four bank has launched a $10 million Flood Support Fund to provide grants to customers and businesses in flood-affected areas. ...Read more
Banking
Guide to NSW flood financial aid: From the banks to insurers
The banks are offering customers affected by the NSW floods loan repayment deferrals, among other forms of financial aid, while the Insurance Council of Australia has declared a catastrophe for much o...Read more
Banking
APRA drops big 4 money laundering case
APRA has followed ASIC in closing its investigation into Westpac over the AUSTRAC scandal, which led to the largest corporate fine in Australian history. ...Read more
More articles
Website Notifications
Get notifications in real-time for staying up to date with content that matters to you.
