Both require a mindset change. In traditional banking, new product innovation typically took a backseat to defensive strategies such as cost control, security, compliance, and incremental sources of revenue through fees and surcharges. These are all worthy goals — and necessary in some cases — but they won’t propel an institution into the digital age. Defensive tactics can even drive customers away, by increasing the friction of using services. Consider an experience many international travelers have had: They try to use their credit card overseas only to have the transaction declined because they failed to call the card provider in advance to notify it that they’d be out of the country. Why can’t that simple transaction be handled via a mobile banking app? Or maybe notification isn’t even required. In her recent travels across South Africa, Europe, and India, Rishi found that she could easily access her banking information from anywhere. “There were no currency conversions, and irrespective of the size of transactions, they were all digital in nature,” she said. Such convenience and flexibility breed customer loyalty.
You can use AI to determine which transactions don’t require money-laundering checks as well as to detect false positives.
Cloud computing provides a needed path to agility by enabling banks to build applications more quickly, tap into cloud-based analytics and machine-learning (ML) capabilities, and integrate third-party services such as mobile payments and microinvesting through APIs.
Read how Permanent TSB Bank, Ireland worked with Kyndryl to advance its digital transformation with an agile and secure environment that is built for the future of banking. Click here.
Banks have been slow to adopt cloud for a variety of valid reasons, but those concerns are melting away. In a recent survey, 72% of the participating banking executives said the cloud can help them achieve their business priorities, according to The Economist Intelligence Unit. And although cost reduction is the biggest driver of cloud adoption for now, so are business benefits such as agility, elasticity, and scalability.
Not that the potential cost savings should be ignored. Bank of America has said it’s saving $2 billion annually by moving most of its data processing operations to the cloud. The Financial Industry Regulatory Authority pegs its total savings at over $100 million. But the better reason to adopt cloud services is to enhance innovation and agility. Banks can use platform-as-a-service (PaaS) offerings to safely conceptualize, test, and prototype ideas without spending a lot of money on equipment and software. Then they can test new features on a subset of customers before rolling them out. Cloud platforms are also fostering the new generation of low-code/no-code development tools that enable people without a lot of technical training to build applications. These tools are particularly popular for automating workflows and creating collaborative workspaces. Gartner estimates they’ll account for 65% of all development activity by 2024. As banks move to the cloud, they can promote innovation by making these tools available to tech-savvy business users. Cloud “sandboxes” enable banks to experiment without risking disruption to the business, and any resulting creations can either be put into use directly or serve as a prototype for professional developers.
Cloud also has the potential to generate new revenue. That’s what Capital One is aiming to do with a software division devoted to delivering a variety of publishing, data consumption, data governance, and infrastructure management services to other financial institutions. Goldman Sachs is doing the same thing with its Financial Cloud. The firm is packaging 150 years of expertise and selling it to other financial institutions as well as making it available to customers. What better way to bond with customers than by helping them make smarter decisions about their money? Banks can also use cloud platforms to enhance customer experience, which is a top priority for most executives these days. Although the digital experience is critical, so is the human touch. Cloud-native chatbots can answer most common customer inquiries instantly without requiring people to wait on hold or navigate a maze of phone menus. Banks can also tap into third-party software for natural-language processing (NLP), translation, and voice recognition as a service to handle more inquiries automatically. There are even cloud call center suites that capture and transcribe phone conversations between customers and agents and apply analytics to determine which topics are generating the most calls or what mood customers are in when they contact you. Data analytics can also be used to segment customers into groups based on their financial profiles as well as to analyze behavioral characteristics. Banks can use these insights to customize services and even predict future needs. For example, customers who take out auto loans to buy minivans probably have children, which means they are good candidates for college savings funds and life insurance. Given the value of these kinds of insights, it’s not surprising that the global cloud analytics market is expected to quintuple from $19 billion in 2020 to $96 billion in 2028, according to Fortune Business Insights.