Digital disruption has clearly hit the banking industry hard across the globe. The first decade of the 21st century initiated enormous change in the way financial institutions operate and this has only accelerated over the years leading up to the current 4th Industrial Revolution (4IR).
After many years of hype, with less change, banks are now faced with the pressure to keep up with the pace of technological innovation and an urgent need to adopt more efficient processes, i.e. innovative mobile banking.
Legacy IT systems pose numerous limitations and banks are still struggling to build the systems they need to compete in this digital age. One top priority is the move to future technologies, built on cloud platforms, which allow banks to quickly develop new applications, add new online services and improve customer experience.
Besides mobile banking – which would be limited without the cloud – other data-intensive applications such as artificial intelligence (AI) and complex data analytics are increasingly important to banks. These are typically cloud-based.
Some of the most advanced AI technology available is now embedded in public cloud platforms. In South Africa, public cloud is said to be a potential billion-dollar market.
The current wave in retail banking
The recent Cloud Readiness Report shares results from a comprehensive global survey conducted by us and Oxford Economics.
In the survey, 53% of respondents within the retail banking industry believe that cloud systems have the most significant impact on improving the operational efficiency of their industry, and 40% agree that cloud generates business value for their industry.
More findings show however that the majority of these banks risk falling behind their competition because they have not laid the foundation for a rapid and orderly transition to flexible cloud systems.
Although banks recognise the need, many of them still lack a comprehensive cloud strategy and implementation plan that will enable a rapid shift to the cloud. With the increasing level of market disruption, this plan is essential. It completes the overall business strategy.
Just over 83% of respondents in the study confirm that their cloud strategy and implementation is only in the experimental phase. The execution or even existence of a transition roadmap from legacy IT systems to cloud systems has been a challenge for many.
Almost a quarter of these banks do not have even the most basic plan in place to move a certain percentage of their operations to the cloud by a pre-determined deadline. These respondents also have no key performance indicators to measure progress or measurements for the value from and return on investment in cloud.
Cloud migration is a managed process
Without new management skills and organisational approaches, the transition to cloud is almost impossible, and banks need a dedicated team to define and execute their cloud strategy.
Among those surveyed, 91% confirmed having dedicated resources to help internal users secure, customise and use cloud resources. Overall, the surveyed bank executives are quite confident about their skills for developing cloud strategy and managing cloud operations.
However, is this confidence enough to advance the overall cloud agenda? Only 45% and 60% of executives say they have mature or advanced skills in managing cloud infrastructure and managing cloud applications respectively. This skills shortfall could be a considerable obstacle.
The greatest red flag in the survey data points to security and compliance capabilities which have been proven to inhibit banks from cloud adoption.
About 37% of the surveyed banks say that their policies related to cloud regulatory compliance are only in the early stages of development and are in need of major improvement. This poses another obstacle. To assist with the process, we have developed 5 Action Points for banks to determine what they should be doing today to accelerate their cloud journey.
In 2019, Standard Bank South Africa announced its shift from legacy IT systems to the cloud, thus claiming its position as ‘Africa’s first bank in the cloud’, followed by a new digital bank; TymeBank as well as the app-based Bank Zero.
The latter allows for very high level encryption and the ability to scale fast. Within a few months, cloud computing had a significant impact on the banking sector where security and customer experience are top priority.
Cloud services are now considered as secure as the legacy IT systems where banks ran their own servers, but cloud offers banks greater flexibility, reach, and operational excellence.
What is your cloud maturity index?
In every industry there are leaders. A few banks are ahead of their peers and have made significant progress in reaping the benefits of the cloud. Leaders in this survey show a total score of 84% in cloud readiness compared to 59% for the remaining banks.
Cloud readiness allows banks to gauge their level of maturity in transitioning to the cloud, and measure how they compare to the survey benchmark. A higher score indicates in general a greater ‘readiness’ and ability to transition to the cloud.
We fully embrace participation in the 4IR and have been actively innovating in the technology space for many years prior.
We have become an intelligent operations partner-of-choice for organisations who wish to seamlessly navigate through the ebbs and tides of digital transformation to navigate the waves of success in this perpetual ocean of change. We guide businesses on their journey to cloud with innovative tools like the readiness index.