Cloud-Native In Banking: Benefits and Use Cases

Increasing customer demands for better digital products and services drive banks to scale their service offerings to keep up with this trend. Access to accounts and banking services from anywhere at any time is now necessary. There is more pressure to adapt and deliver high-quality applications so that banks can grow their digital business and remain competitive while confirming security and compliance regulations.

The banking sector needs a faster, more agile, and scalable way of implementing changes to achieve its goals and meet customer needs. The cloud-native approach to building applications takes advantage of cloud computing strategies and models, including principles of DevOps, to deliver new services and features. Cloud computing and banking are the future of finance, offering the banking sector speed, flexibility and innovation.

This article explores the benefits and use cases of the cloud-native approach in the banking sector.

Benefits Of Cloud Native Approach for the Banking Sector

• Improved cost predictability and cost reduction: Server maintenance, software updates, hardware upgradation and the need for specialized staff to perform tasks for legacy or even hybrid IT models can impose a significant financial burden on banks. The cloud-native architecture allows banks to update applications continuously and consistently while managing all aspects of their infrastructure automatically, helping reduce costs. Cloud-native components and infrastructures are more accessible to update and replace than legacy systems, which require more integration and replacement efforts. Cloud-native infrastructure can be easily scaled. Banks can increase or decrease resources as needed and pay only for resources used, resulting in huge savings.
• Speed and flexibility: While legacy systems are proven technologies, they are slow and inflexible, given the pace of innovation and its use. New technologies and service delivery models like cloud naive enable banks to adapt and transform consumer banking. Container-based platforms mitigate automation and accelerate development, thereby reducing time to market. Additionally, identifying application components using APIs and microservices banks can easily integrate legacy applications.
• Compliance and security: The banking industry faces many challenges in its journey in digital transformation, especially in compliance and security. Cloud-native makes it easier for digital banking to be compliant and secure by automatically updating the protection against evolving regulations and new threats. Data analytics makes it easier to detect and prevent compliance issues and threats in real-time by proactively updating infrastructure and applications. Cloud-native applications give access to ample storage, faster processing, usage and sharing capabilities, making it easier for stakeholders and regulators to access information.
• Enhanced user experience: Cloud-native applications provide bank customers a smoother, faster, more personalized user experience. Using AI and ML to analyze customer data and behavior can enable banks to offer customized services and tailored recommendations. Cloud-native apps can be adapted to changing customer preferences and need to deliver a consistent and seamless experience across multiple devices and channels.

Use Cases of Cloud-native Applications in the Banking Sector

• Fraud detection and prevention: Banks can use the cloud to integrate fraud detection facilities into the banking system. This enables them to process vast volumes of data from multiple sources to detect suspicious and fraudulent activity in real time.
• Data analytics: Cloud-based analytics platforms can help banks gain insights into various customer requirements, patterns, trends etc. These data points can be analyzed in real time and the results can be used to engage with customers across multiple touchpoints. This is only possible in a cloud environment and cannot be accessed within the legacy infrastructure. These insights can be used to reduce customer challenges and increase loyalty.
• Customer relationship management: Customer relationship management or CRM is a system that helps banks manage their interactions with current and potential customers. CRM in a cloud-native environment is designed and developed to run on the cloud with scalability, resilience and agility features. It helps improve customer experience and enhances innovation across multiple channels and devices.
• API ecosystem: API ecosystem, a network of interconnected APIs enable banks to offer digital products and services. It helps banks create new business and revenue models such as banking as a service (BaaS), platform as a service (PaaS) and even embedded finance. These involve providing banking services using APIs that can expand banks' reach and value proposition.
• Public cloud IaaS: This service provides computing resources such as servers, storage and networking over the internet and enables cloud-native banking services to run on the cloud using its features like scalability, resilience and agility. For example, Microsoft Azure offers a range of cloud services for the banking industry, providing various services such as Azure Synapse Analytics used for data analytics, Azure Cognitive Services for AI and ML, and Azure API Management for open banking.

Conclusion

There is an increasing need for financial and banking institutions to be faster and more agile in the face of changing market conditions, increasing customer expectations while staying compliant with regulatory requirements and updated in security and corporate standards. This requires them to adopt an approach that provides the capability to roll out new applications and services to meet these needs cost-effectively at speed. A cloud-native development strategy about the entire software development lifecycle encompassing people, processes and technology can give banks a competitive advantage.