Why Banks Need a Holistic Approach to Digital Transformation

By Imran Vilcassim, Global Solutions Director, Digital Platforms, BPC


Overhauling legacy infrastructure and replacing it with digital-first, cloud-enabled solutions is at the heart of digital transformation in Financial Services. Done right, it can drastically improve the efficiency and scalability of financial services for consumers and businesses alike, while pushing forward the agenda on financial inclusion.

However, it is all too common to see a customer-facing layer of cloud-enabled digital services built on top of a core of legacy infrastructure. A holistic approach is key – impressive digital interfaces are a crucial part, but nothing more in isolation. Banks need to embrace end-to-end digital transformation, addressing inefficiencies throughout their infrastructure to truly realise the gains from cloud-enabled infrastructure.

Cloud infrastructure enables an innovative philosophy

Legacy systems, including mainframes and AS400 architecture, played a crucial role in onboarding banks and other key industries onto the early versions of the web. However, their days are now numbered. The advent of cloud enables banks to migrate from their own servers to centralised, hyper-efficient data centres, bringing with them significant cost savings and productivity gains.

The benefits of hosting software in the cloud are not limited to the cost improvements of maintaining and deploying platforms, but extend to the type of platforms a bank is able to deploy. Banks which host their infrastructure in the cloud are able to onboard a diverse range of SaaS solutions, seamlessly integrating each within the rest of the tech stack via API. This would then pave the way to enable Banking as a Service (BaaS) offerings where Banks are also able to work with non-financial services institutions to enable innovative financial services offerings which would pave the way for customer acquisitions through innovative channels. Eg: A Bank could work with an Airline to offer loans or enable BNPL offerings to customers at the point of purchasing tickets for a much needed vacation with family.

In addition, by building their infrastructure with a range of contributing fintech partners, banks benefit from consistent iterative advancements across their tech stack at no additional outlay, creating an innovative philosophy with a pipeline of new features to roll out to customers. It’s also lower risk than building in-house legacy software; in place of relying on one internal stakeholder, banks are able to periodically re-evaluate the provider of each segment of their digital infrastructure.

Digital transformation throughout the tech stack

It’s common for banks to appreciate the benefits of a digital-first brand image, implementing a sleek customer-facing interface on top of its legacy infrastructure. This is a significant first step in building trust in SaaS providers and expertise on the cloud, but to truly harness the benefits of cloud first infrastructure,it’s key that a shift occurs at all levels of an infrastructure and organization.l.

Scalability is a key consideration for all banks, and cloud infrastructure is a key enabler for uninhibited product and customer growth. With a complete migration of legacy systems onto the cloud, banks unlock the benefits of horizontal scalability. Hence, product teams are able to launch new features and platforms without complicated server scaling processes, increasing the banks’ flexibility. Cloud infrastructure also enables banks to seamlessly expand to new geographies, including on-soil deployments, handle a sudden influx of new customers, and accommodate a plethora of unforeseen increases in demand for their services.

Cybersecurity is a growing threat to all financial institutions; Sophos recently reported that the rate of ransomware attacks in the financial services industry has increased from 34% in 2021 to 64% in 2023, almost doubling in two years. A key tactic banks can employ to fight back against bad actors is migrating digital infrastructure to the cloud. Cloud providers invest heavily in fortifying their cybersecurity, staying on top of new attack vectors and enabling damage mitigation strategies, including automated data backups and embedded security.

It’s also an economies of scale issue – a key advantage of switching to cloud-enabled banking infrastructure is reduced maintenance costs. Without a complete switch to the cloud, maintenance costs often increase, requiring multiple skill sets to maintain both legacy systems and cloud based infrastructure.

Banks are once again at an infrastructure crossroads. The legacy systems which have played a pivotal role in their operations over the last few decades are now struggling to compete with centralised cloud infrastructure. It’s key that banks enact a holistic approach to digital transformation, creating a plan to migrate each and every part of their digital infrastructure onto the cloud to increase the bank’s scalability and security.


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