Six reasons why cloud banking will transform banking in the future

Managed services for retail banks and financial institutions

SaaS is the future. It is hard to imagine a future where financial systems can carry on using the outdated legacy systems. The rise of technology and a new generation of consumers has exposed the vulnerabilities of banks and other traditional financial services. Post recession regulation imposed on banks is also another major factor that opened up the doors for disruptive players. Banks are losing a large chunk of their business to these disruptive challengers, and will continue to do so until they do something about it.

Financial institutions are still playing a game of catch-up with regards to technology. This rapid growth in tech has seen software taking over much of the traditional banking operations. The utility of banking is gradually being replaced by software. Banks' apprehension to embrace software has majorly been due their concerns about security. However, this is turning out to be inconsequential to the modern consumer. With almost every retail product only a click away on their smart phone, consumers have began to look for such ease of access in all their interactions. Moreover, no consumer today is interested in a visit to the bank or a personal interaction.

Traditional financial institutions world over are under pressure to be more efficient. Legacy systems are being scrapped for leaner and more snappy offerings. IT spending has to be calculative and efficient. The consumer demand is gradually driving banking institutions towards the cloud. However, most of them are still apprehensive about giving up on valuable customer interactions. Banks need to get over the fact that they are not going to be in control anymore.

At this point, if you are still not sold on the cloud banking idea, let us try and list out the various advantages that arise out of adopting a SaaS implementation.

1. Reduction in costs: This is a bit of a no-brainer. Once you discard the clunky legacy systems, you have significantly reduced your spending on upgrades and maintenance. Cloud operates on a Pay-on-demand model. Having your applications on a cloud lets you bring down IT expenditure and focus the corpus saved elsewhere on areas that require improvement.

2. Flexibility and scalability go up: Volatility in the market has always been a concern for banks. With the cloud model banks can respond to the demands of technology and the consumer almost instantly. Being able to scale up or down rapidly will give banks that competitive edge that they need.

3. Increased efficiency: The standardized operation due to cloud will ensure that integrating new applications and technologies in the future is easier. Banks can now drive out complexity.

4. Faster customer service: Services and bundled products are much easier to develop on the cloud as software/hardware procurement delays are effectively eliminated. Computing power can be boosted to suit the consumers demands and access to data is as simple as logging in from your browser.

5. Client relationships are much more enhanced: The availability of so much data and big data analytics means that banks can now understand their customers much better than before and provide them with products that suit their needs. These valuable insights make customer service much more personalized This goes a long way in generating good will for the bank.

6. Clients are closer to their clients: Payments between sellers and buyers are simplified with transaction banking. Current cross-platform payment inefficiencies are effectively removed by bringing both sellers and buyers on the same platform. 

The customer service metric has changed drastically, consumers no longer judge the services of banks based on interactions. Service quality is purely about providing the consumer easy access to his banking with the least possible interactions. The future of the banking industry is not yet very certain, but the best bet for anyone right now would be to invest some time to look into SaaS. Greater connectivity to banking minus the long interactions and waiting is what disruptive challengers offer consumers. Banks cannot really afford to lose valuable business on something that is in their control to change.

SaaS Banking does give rise to several concerns. Please check out our perspective on these concerns in a previous article on banking on a cloud model.

Are There Security Risks with SaaS Delivery of Core Banking Services?