Over the years, banks have built up a tangle of legacy systems that are slowing their digital transformation efforts. Antony Jenkins, 10x's Founder and CEO, has likened banks to museums of technology, with IT budgets skewed to maintaining their aging infrastructure, leaving little budget for innovation.
In a recent webinar, Richard Caven, Lead EMEA Banking Specialist at AWS, and Jonathan Sowler, VP of Engineering at 10x, discussed this subject in detail.
The pair discussed how embracing the cloud further can help banks accelerate digitization and focus their development resources on innovation and improving the customer experience. You can watch their conversation in full here or check out the five key takeaways from their conversation below.
Iteration is the key to innovation
Richard explained that there are two stages to innovation that banks need to follow.
First is ideation. Second is iteration, where banks can build on those ideas, course-correct, and refine them. “Ideas are sometimes easy to come by, but they’re very hard to deliver,” said Richard.
One reason why legacy technology can slow bank innovation is because legacy tech is hard to iterate on. Legacy systems are typically multi-layered, making changes is difficult and risky; if something doesn’t work, it’s not easy to go back and change. For banks to innovate faster, they need technology that allows them to iterate more efficiently and with low risk, allowing them rollback and fix any errors without disruption.
Unlocking greater agility
To be more agile, which is increasingly important, banks need to embrace the cloud and SaaS platforms rather than spending time and resources building proprietary systems from scratch, explained Jonathan.
This will give banks the ability to respond to shifts in customer demand and deliver new services much more rapidly. While neobanks, who aren’t saddled with legacy debt, have an advantage in this area, some incumbents are making faster progress with transformation because they have a mindset that recognizes the need to bring the business and technology teams closer together, said Richard.
The right organizational structure and culture is vital in bringing digitization programs to life.
Cloud migration is just the start
Banks also need to recognize that cloud technology is just an enabler for digital transformation: “Anybody who thinks that moving to the cloud is the entirety of their digital transformation journey needs to have a bit more of a think about how the technology is used in their organization and the benefits that they can get out of it,” said Richard.
He went on to explain the three ways cloud adoption enables digital transformation. First is the ability to innovate and iterate. Second is the ability to change and adapt at speed. For example–building and updating products faster to meet customer needs. And finally, the cloud gives banks access to a broader range of data to drive better decision-making.
For more detailed information on migration, download our whitepaper, 'making sense of cloud-native banking migration', in collaboration with AWS and Contino.
Unleashing the power of data
Jonathan explained that data is at the center of all digitization efforts. By bringing together information from different sources, banks can start to understand more about their customers, such as their spending patterns and how they are using their accounts, enabling banks to tailor and optimize their services to create a more personalized customer experience.
Data can also be used to spot patterns that may signal potential customer vulnerabilities, enabling banks to intervene sooner before problems escalate, protecting the customer, and improving risk management.
In addition, Jonathan explained, modern cloud services and API connectivity let banks seamlessly integrate multiple data sets, helping them identify new business opportunities.
For more on the power of data, download the whitepaper today.
By adopting a cloud-native core banking platform, banks can innovate faster, respond to changing customer needs quicker, and make smarter data-driven decisions.
Banks can then enhance service delivery and create products that will help them stand out from the crowd. Not only will this help generate new revenue streams (embedded finance, for instance), moving to the cloud will also reduce operational costs because banks are not having to maintain lots of on-premises infrastructure.
“Those benefits accrue to the business because you’re able to deliver services to customers much more cheaply, more efficiently, and more effectively,” said Richard. Despite the commercial pressures to digitize and innovate, Jonathan and Richard both stress the importance of adopting an incremental approach to transformation. By taking it one step at a time, banks can remain in control and manage their change programs more effectively and with lower risk.
For more information, watch the full webinar here.