Cloud is one of, if not the most important tools of transformation in the digital world. Over the years, it has proved its worth by enabling agile delivery, providing compute on demand, transitioning infrastructure costs from Capex to Opex, and in the specific context of banking, enabling financial institutions to evolve from consuming infrastructure-as-a-service to providing banking-as-a-service. Also, from a technology standpoint, platform-as-a-service models have been influential in changing the technology-cum-business focus of banking IT to a pure-play digital and domain focus by relieving banks of the responsibility of managing their IT infrastructure.
Meanwhile, digital technologies have progressed rapidly to achieve unprecedented levels of adoption. A great example is how these technologies have supported the proliferation of UPI payments in India, which crossed 4.6 billion transactions in January 20221. While none of this would have been possible without cloud, traditional cloud technologies alone can no longer sustain this kind of growth.
So now it is time for enterprises to take cloud (and cloud-led transformation) to the next level. From a technology perspective, three cloud-complementary technologies, namely APIs, event-driven architecture and data analytics, are crucial to this agenda.
APIs: APIs are valuable because being standards-based, they are easily governable from an access point of view, and easy to support from a data transformation point of view. The availability of standardized frameworks around the API model is a crucial factor in delivering data at scale and driving innovation on cloud.
The best way to understand this is by looking at successful implementations. Emirates NBD was the first bank in the U.A.E. to launch an API sandbox, so it could capitalize on the open banking opportunity. With the help of more than 70 Finacle-powered APIs, ENBD’s Fintech partners were able to create several proofs of concept on the Bank’s platform2.
Nigeria’s pan-African financial services group, United Bank for Africa (UBA), leveraged RESTful APIs to integrate Finacle core banking with a customer’s ERP and reconcile branch transactions with its database. This enabled transactions in more than 700 branches to flow into the customer’s database and facilitated tracking by printing details, such as the transaction number, on depositors’ acknowledgment slips. It also made it easier for customers to reconcile sales and inventory online3.
Goldman Sachs took a cloud-based approach to disrupt the retail banking segment when they launched Marcus. Marcus offers extensive self-service capabilities on digital channels to design truly personalized products, giving end-consumers the flexibility to choose lending terms such as repayment amount and tenor. Marcus has designed and built modern technology operations by ensuring straight-through-processing across digital channels to its core banking solution, which leveraged the technical architecture of Marcus, along with its RESTful APIs and process orchestration capabilities to optimize operations4.
Event-driven architecture: The advantage of this technology is that it decouples data production from consumption, such that data produced in a certain format in a certain location can be easily consumed in an entirely different format somewhere else. For example, transaction data generated in a bank’s legacy system on-premises may be consumed by a cloud-based analytics system to deliver insights via an API-driven ecosystem provided by a Fintech innovator.
As banks gradually transform their traditional architecture, eventing will be key to bridging the data gap that exists today between the legacy and modern worlds. In conjunction with APIs, this technology will play a huge role in taking data and delivering it at scale in the digital world.
Data analytics: Data is the lifeblood of the digital economy and is central to everything. That’s why it is being touted as the new oil. In banking, for instance, it enables everything from product development to back-office operations to cybersecurity to customer engagement. With all kinds of applications migrating to cloud, it acts as a repository of rich producer and consumer data. Using analytics, enterprises can derive insights from this data to deliver greater value – for example, by personalizing an offering that is contextualized to a customer’s need.
Bank Rakyat Indonesia took advantage of analytics on cloud to help small borrowers seeking unsecured loans (up to IDR 20 million) to tide over personal and business requirements. This was a clear area of opportunity, largely ignored by the country’s formal banking system. BRI crafted an automated digital lending solution leveraging the Finacle Lending solution and the Finacle Digital Engagement Hub which issued loans in about 10 minutes5.
Stepping up to the next level
In the initial phase, cloud delivered its promise of cost efficiency, agility and flexibility. But now, it needs to step up to deliver data at scale and the enormous on-demand processing needs that come with it. This is only possible by bolstering cloud with the power of complementary technologies, such as APIs and event-driven architecture. These technologies, along with data analytics, will drive the next wave of cloud advancement. And also, the next wave of banking transformation.