Financial meltdown in 2008 caused a total collapse of few leading banks in US and Europe. People lost their faith on the banking industry. Economy went into a depression due to liquidity crisis in the market. After few years the economy recovered due to quantitative easing programs run by central banks. Markets started showing the growth momentum. Rich country like USA has made a record with number of successive quarters of growth. Most of the key economic drivers such as interest rate, inflation and unemployment rates are under control. The pundits who usually predict next recession timelines have proven wrong for last several quarters. Experts now say that few key factors are responsible for this consistent growth trend. One is timely intervention of central banks and market regulators to keep the liquidity stable. This is possible as a result of new data and analytics technologies implemented to bring the transparency. The other factor is efficient supply chains led to transformation in many sectors especially in the area of retail and manufacturing area. The new transparent systems and service efficiency led to growth in many sectors and overall economy. During the same time, the financial services sectors especially banks have been a laggard in adopting new technologies. The technology innovations in this sector are mostly targeted towards retaining the existing customer so that they can survive any downturn.

“Survival of existing players in financial services depend on how fast they can transform their core platform to bring speed and transparency”

Most of the actions including any transformation taken by financial institutions are focused on improving resilience. This helped in avoiding another crisis but didn’t help much in regaining the trust of people. A large chunk of investors has moved into alternate channels to keep their investment secure and get a better return. Almost every institution started planning for digitalization and automation to bring more efficiency, but the execution remains slow and ineffective due to rigid processes combined with legacy infrastructure. This has led to slower growth in this sector as they are slow in attracting new customers. Even government’s and regulators’ push for digitalization is not helping these institutions. At the same time, few new age institutions such as fintech or digital banks were only able to attract the new customer by showing agility in their services. This is what the older institutions found it hard to adopt. They only focused on new user experience (UX) through multi-channels enablement. The core businesses continue to operate on the legacy process and system, hence unable to provide the desired agility in its services. The newer institutions adopted completely newer technology at core that helped them to improve the speed of the service. For example, in new digital banks, account opening is done in 3 seconds whereas for older banks, it still takes 3 days.

If the old institutions want to regain the trust of people, they need to focus on speed and transparency. They must build the new platform from the ground and adopt emerging technologies such as cloud infrastructure. Cloud is no more just a strategy to reduce the capex cost. It provides the mechanism to build a service engine that can be as efficient as new age supply chain engines. It also helps in reducing the time to launch new features. Unlike monolithic systems used by most of the institutions, cloud-based systems are more platform agnostics and interoperable. This will help the financial institutions to participate actively in their daily life activities through multiple platforms and channels with which customer is already engaged. This kind of enablement will give the institutions an expanded playing field to generate the revenue.

Another area people would like to see is transparency; traditional mechanism of bringing transparency such as periodic statements does not help a person to analyze the overall risks. Due to complex value chain in financial services world, it is often difficult to have a complete transparency of the system. Sub-prime crisis in 2007- 08 is primarily occurred because of lack of transparency. After that the regulators have put adequate controls to increase the transparency so that another crisis can be avoided. But from the consumer perspective, the transparency is still missing in the system. They continue to doubt the system. By moving to a cloud-based model, it will help in managing the systems effectively and bring transparency at every level.

Business always has concerns related to data security and privacy in cloud. From customers point of view, they go to financial service providers to meet their daily needs and life goals. Also, with stronger data privacy and security practices already implemented by cloud providers, institutions can concentrate on building the services that meet the real need of the customers. Survival of existing players in financial services depend on how fast they can transform their core platform to bring speed and transparency. So earlier they move to cloud, they have a better chance of survival.