When it comes to digital transformations, financial institutions are reaching toward the cloud. Part 10 of Celent’s Digital Panel survey reveals that 75 percent of respondents rate a skyward transition as their top technology priority.1
Interest in cloud adoption is part of an overall movement to improve the customer experience as consumers turn to online and mobile channels to manage their finances. The COVID-19 pandemic has only served to accelerate the transition to digital.
McKinsey & Company estimates that the adoption of digital channels and capabilities was advanced five years over the initial eight weeks of the pandemic.2 Other research indicates that newly adopted digital habits are here to stay. Most consumers—87 percent—say they will continue to use new digital tools and channels in the future, according to BAI Research.3
However, satisfaction with several aspects of the digital banking experience isn’t measuring up to consumer expectations. The result, according to Bain & Company’s 2019 customer experience study, has been a hidden customer defection.4
The survey of over 131,000 people indicates that loyalty is low, and traditional banks and credit unions are losing consumer business for secondary financial products, such as a mortgage. Increasingly, traditional account holders have been turning to more digital-savvy providers when seeking new products like these. As a result, the Global Digital Lending Platform Market size is expected to reach $11.6 billion by 2025, rising at a market growth of 20.3% CAGR during the forecasted period. Moving into 2021, digital will become increasingly more integrated into the lives of consumers, calling on financial institutions to quickly evolve to a higher level of digital operating. That means providing more capabilities to keep customers and members loyal to the brand.
The answer to this rapid evolution to digital services lies in the cloud.
Go big or go home on cloud initiatives
Two-thirds of the panel responding to Celent’s survey indicate that they have an enterprise-wide cloud migration strategy at the ready.5 However, near–term initiatives focus primarily on migrating non-core systems to the cloud while maintaining core banking systems and data on–premises.
Without a long-term plan for addressing the customer experience, these approaches could backfire.
For one thing, most banking cores were developed well before the modern age of the computer—and the smartphone-enabled applications customers are using to manage their lives. In just the last decade, the number of financial apps has exploded. From making deposits to paying bills, consumers are turning to online and mobile channels to manage their money.
While it is possible to connect digital applications like these with traditional cores, the financial institution isn’t always realizing the most efficient outcomes. Without care, banks and credit unions can create silos that result in internal inefficiencies and, more importantly, a poor customer experience.
Poor experiences across digital channels encourage defection down the line when customers or members seek to open new accounts, secure financing, or adopt new digital banking services.
Migrating to a cloud-based core solves these disconnects by creating a unified environment. Data and applications are connected by APIs, making it simple for banks and credit unions to seamlessly unite a world of products and services.
Fortunately, cloud-based core migrations are far simpler than previous core transformations. Simplicity and ease are demonstrated by Finastra, the first core provider to transition to the cloud. Finastra has already migrated nearly a million users to cloud-based cores due to the streamlined efficiency of the process and the superior results financial institutions have received.
Meeting the innovation imperative with the cloud
As consumers accelerate the adoption of digital banking services, innovation has become a top priority for financial institutions. But rather than replacing the current focus on cloud adoption, the two initiatives will work together.
Research by Celent indicates that 52 percent of surveyed banking executives had platformification initiatives underway or are considering it as a path toward innovation.6 Defined as a plug–and–play business model that allows multiple players to connect and exchange value, platformification is born in the cloud, where multiple vendors connect to APIs and build a nearly limitless selection of products and services.
For financial institutions, it’s the plug-and-play aspect of cloud functionality that matters most when it comes to adapting to the increasingly digital environment. Through cloud-based APIs, banks and credit unions easily connect to the products and services their customers want to use or rapidly digitize whole processes to improve the customer experience.
The result? An interconnected banking web where customers seamlessly switch between services and banks realize the benefit of faster, more efficient processes.
Learn more about how the cloud can transform your financial institution.
1 Bob Meara and Craig Focardi. “Cloudy Skies in the Forecast: Accelerating Cloud Migration in a Pandemic.” Celent. Celent Digital Panel Series Part 10, Sep. 30, 2020. Web.
2 Aamer Baig, et al. “The COVID-19 Recovery Will Be Digital: A Plan for the First 90 Days.” McKinsey & Company, May 14, 2020. Web.
3 “BAI Research: 87% of Consumers Plan to Continue Their Increased Use of Digital Banking Tools After the End of the COVID-19 Pandemic.” Businesswire. BAI Research Press Release, Sep. 9, 2020. Web.
4 “As Retail Banks Leak Value, Here’s How They Can Stop It.” Bain & Company. Bain & Company Report, Nov. 18, 2019. Web.
5 Bob Meara and Craig Focardi. “Cloudy Skies in the Forecast: Accelerating Cloud Migration in a Pandemic.” Celent. Celent Digital Panel Series Part 10, Sep. 30, 2020. Web
6 Gareth Lodge. “Platformifiation: How Banks Can Transform Their Innovation Efforts.” Celent, May 2, 2018. Web.