Banking on the cloud
Arindam Mukherjee, Vice-President - Sales (BFSI), Cisco India and SAARC
The 'digital ecosystem' surrounding a bank today is exploding at a pace never seen before. The reason for this is two-fold. First, consumers are leading the way, forcing banks to offer what they want. Secondly, with consumers embracing a mobile lifestyle and socializing on digital platforms, they expect banks to connect with them on the same platforms.
Banks are seeking to transform their product offerings, channels and customer service to reflect the demands of the changing consumer - connected, impatient, empowered and demanding services that meet their individual and social needs. For this, banks need to integrate business processes with advanced analytical capabilities driving continuous refinements to processes, services and products in real-time.
These tectonic shifts, which include facets such as mobile banking through near-field communication (NFC) or mobile wallets and geo-localization, will define the banking experience over the next 5 to 10 years.
Banks are increasingly relying on the power of the cloud to achieve their objectives and manage current market challenges. The shifts are occurring in phases, sometimes in parallel, through distinct adoption curves in process and complexity. The three 'waves' of cloud adoption by banks that we see are as follows:
Taking non-core operations to the cloud
Adoption of cloud models generally has greatest impact in the parts of the value chain where there is minimal differentiation. Cloud computing can provide banks with new lower-cost operating models thanks to greater automation, virtualization and a massive scale-out option with the ability to outsource a number of non-core activities.
Potentially, it is possible for all non-core banking data in the country to be virtualized within a federated cloud that has the necessary security levels to meet compliance requirements. This way, banks can be sure of where their data is located and also ensure simplification of their back-office processes such as email, office/workforce productivity, internal collaboration, not directly involving sensitive customer data. These cloud services can be also be extended to activities such as check clearing, credit card processing, procurement and HR processes.
Single-tenant private clouds ensure security
Today, banks are still reluctant to entrust sensitive customer and financial data to third-party public cloud services providers. Data privacy and regulations also prohibit storage and processing of customer data outside national borders. Banks are also wary of the potential threats such as breach of privacy due to brief outages in ATM operations, fraud monitoring or credit card processing. However, present-day banks have proved to be more willing to incorporate single-tenant cloud solutions into their core banking activities. Cloud models that are being executed at different levels of the technology stack range from IaaS, via SaaS and PaaS, to BPaaS.
This new normal will challenge banks' traditional ways of translating their business requirements into IT solutions. It will also dramatically reshape the role of IT and require a new governance model, skills, behaviors and ways of sourcing IT infrastructure. Irrespective of the model, cloud computing will help banks to break down existing silos, decouple physical from virtual IT and separate production from distribution - to boost business agility and customer responsiveness.
Social media to transform consumer banking
Core banking products such as checking accounts are increasingly undifferentiated. The real differentiation lies in the pricing and bundling for consumers. Some banks might locate their product engine in a cloud, while retaining a unique and sophisticated bundling capability that pulls together and combines cloud-based components in responsive, collaborative and dynamic bundles relevant to specific customers. Cloud-enabled digital wallets carrying a range of different services on smartphones is another high-potential area, although this will require agreements with various telcos over customer ownership.
As banks become more customer-centric, they will invest in social media tools and create social enterprise strategies to connect with their audiences and get insights into their personal social profiles. This information can then blend with the banks' own customer/transaction information and other public, location and web behavioral data to get a 360-degree view of the customer. This, in turn, enables banks to generate and deliver relevant offers on a timely - even real-time - basis via the customer's preferred channels.
Cloud enables new and bundled services to be rolled out faster and almost every bank stands to gain significant benefits whether by partnering with cloud-based providers or on a stand-alone basis. The future holds a lot of promise. For instance, banks in emerging markets can use cloud computing to reach their unbanked populations by leap-frogging physical branch networks and moving straight to electronic and mobile banking. The possibilities are endless!