There's too much legacy tech, and that won't cut it in a digital world

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Nearly every aspect of our lives is shifting to digital, remote and online. While the technology sector moves swiftly to keep up with the latest trends, banks and financial institutions remain notoriously slow to evolve.

In today’s age, card issuers such as banks and FIs must keep up with changing customer demand and an over reliance on legacy technology running on bank-owned computing hardware is one of the biggest things holding them back from matching the agility that consumers need for digital payments and other transactions.

Over the last decade, cloud computing has firmly established itself as a must-have in the tech stack, unlocking enormous commercial benefit for organizations that have adopted this new model. However, you’d be surprised by the number of global banks that continue to resist digitally transforming their operations with a shift to cloud. The bulk of legacy banks operate on outdated proprietary infrastructure that hinders their ability to offer similar products to neobanks, the new kids on the block whose digital-only approach allows for the offering of more tech-savvy features and a natural fit to cloud computing.

Many banks that are boxed in by their legacy systems are contemplating a partial move to cloud, adopting a hybrid approach where on-prem and cloud solutions run together. While this may sound like a sensible way to dip a toe into the cloud pond while retaining security of the past, legacy systems could hinder the potential of cloud. In order to tackle the modernization challenge, banks and FIs need to make the complete leap, and not a tenuous step.

While a growing number of financial institutions are coming to recognize why the move to cloud is a challenge worth taking on, a recent study found 46% of bankers still view cloud migration as their biggest hurdle to achieving future growth. But this is a move that is well worth making. For those still needing convincing, here are the top three benefits banks and FIs should keep in mind when considering migrating to the cloud:

Reduce costs. A key benefit of migrating workloads to the cloud is reduced costs. According to research by IBM, 87% of outperforming banks are using cloud-based solutions to reduce operational costs — a significant figure. Migrating to the cloud eliminates both the need to upgrade physical infrastructure and staff onsite infrastructure management. It also enables companies to standardize their business processes on cloud-hosted computer systems, benefiting from the enormous reductions in cost that come with extensive standardization.

Diminishing business and operational costs by deploying cloud solutions allows resources to be redirected to invest in new products and features that can increase the customer experience while lowering total cost of ownership.

Increase scalability. Cloud infrastructure is equipped with application programming interfaces, allowing multiple applications to “talk” to one another,” which can be a game changer for FIs wanting to scale. Instead of building applications from scratch, FIs can make connections with existing systems through standardized APIs, which speeds up the time it takes to bring services to customers and helps achieve interoperability across payment systems. APIs are to computing what the humble electric plug is to the energy industry: simple, standard, reliable.

Continuous upgrades. Being able to offer customers the latest features and capabilities is what sets companies apart from the competition. With cloud tech, FIs can quickly implement new application features and make real-time networkwide improvements that enhance the overall customer experience. They are able to buy and quickly apply market-leading products and services, as soon as they become available in-cloud, rather than slog through long and very expensive projects to adapt on-prem legacy technology to do the same.

It’s up to big banks to take notice of the changing tides and take the first step in moving toward modern solutions like cloud. For the banks and FIs that are considering a move to the cloud, now’s the time to take the leap as the global pandemic continues to push our world towards a more cost-conscious era in the short-term aftermath, and a more digitized and remote-hosted cloud future.