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Why cloud-native? The case for modernizing legacy core banking systems

Consider a cloud-native banking platform

While the case for the cloud has never been clearer, many banks are running their core banking operations on legacy systems hosted on-premises, which makes it hard for banks to iterate and evolve their proposition. In this blog, we outline why banks should consider a cloud-native banking platform when it comes to migrating away from legacy systems. 

The benefit of moving away from legacy banking systems

By moving core banking operations to the cloud, banks can begin to decouple their tech stack, moving from legacy and monolithic to modular and digital. Each component of the banking ecosystem can operate independently, making changes and updates much easier, connected via APIs. 

This means change can take place without impacting the entire system, enabling banks to experiment and iterate more easily in order to continually improve their services. 

A cloud-native core banking system sits at the center of the modern banking ecosystem. Not only are these more cost-effective to run than legacy, on-premises banking systems, they also allow banks to be more flexible and agile – something that’s critical for traditional banks as more banks are able to roll out changes very quickly. 

Today, just 32% of banks believe they can respond to market needs in the required time, according to a 10x survey. On average, banks take 3.8 months to launch a new product in an existing market.  

When banks have great product ideas, it takes them too long to provision new services or make the necessary changes to back-end systems, explains Stuart Coleman, SVP of Engineering at 10x Banking. 

“The way that 10x has built its service, you can do the holy grail in banking: you can do a proof of concept for a new banking product, you can tweak things very easily, you can have a product manager go in with no coding support, look at the product definition, and play with it. They can understand what the market is looking for in ways that banks have never been able to,” he says. 

Enjoying the blog? Download our migration whitepaper, in collaboration with AWS and Contino, for more.



Now the benefits of migrating to the cloud are no longer hypothetical. Banks know they can’t hide from digital transformation. It’s now about how to implement to cloud.

Arun Chalil Product Manager, 10x

Fear of migration 

The challenge of migrating from legacy banking systems to cloud-native ones has shifted from ‘why’ to ‘how’ in recent years, as Arun Chalil, Product Manager for Migration at 10x, explains: 

“If you look back to 10 years ago, the conversation was: why not on-prem?” says Arun. “Now the benefits of migrating to the cloud are no longer hypothetical. Banks know they can’t hide from digital transformation. It’s now about how to implement to cloud.” 

The benefits Arun alludes to include:  

  • Security – It's very difficult for a bank or any financial institution to have the people, training, and protocols that hyperscale cloud vendors have. 
  • Availability – Cloud-native platforms can be updated without disrupting customer access. New features and fixes can be added much easier, evolving the tech stack over time. 
  • Auto scaling – The cloud enables cost-effective scaling, where only the infrastructure used is paid for. Demand can be met without having additional capacity on standby for predicted and unforeseen spikes. 
  • Data and analytics – from fraud to case management, real-time data can transform operational processes and customer-facing experiences. 

Despite the benefits, many banks are still cautious about making the switch, as Arun explains: “Migrating core to the cloud is still considered one of the most complex exercises. If you look at large traditional banks, they can take anything between two to five years to complete a migration exercise fully. A lot of time and budget cycles goes into making it happen. 

Arun adds that inertia is still a big challenge. Because even if banks have monolithic systems which they know could be more efficient, they are stable and they work. Avoiding the risk of disruption is often a reason to not migrate. 

Taking a phased approach 

One of the common missteps banks make when thinking about migrating to the cloud is that they have to take a ‘big bang’ approach—that all systems have to be migrated in one go. 

“They think of it like it’s a do or die situation, that everything has to be done now and they just have to get to the other side of it,” says Arun. 

A better strategy is to take a phased approach to migration where the process is divided into small chunks over a number of months, helping reduce the risk. 

“That way you can phase the whole migration into smaller test phases and iterate from there as you get feedback from employees and customers,” Arun says. 

This approach can reduce the whole complexity around migrating, helping banks to modernize without committing to a big bang migration. 

Download the migration whitepaper

To learn more about migration and understand more about de-risking the process through phased migrations, download our whitepaper in collaboration with AWS and Contino today. 

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