Business Strategy For Banks – Cloud Banking: Five Strategies Which strategy is best for banks: lift and move, revamp and migrate, improve and move, sunset and reset, or new and native?
Cloud is increasingly popular in the banking sector, but many discussions tend to be pro or con for the entire IT landscape. Banks can benefit from nuanced, fact-based choices among 5 cloud strategies.
Business Strategy For Banks
All industries are currently implementing cloud solutions. Banks aim for advantages such as shorter time to market, easier involvement in fintech innovation and less risk of technology obsolescence. However, banks are somehow later in the game than others due to a number of significant barriers, e.g. data location and security issues and “proving” to management that the journey to the cloud is economically attractive.
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Figure 1 shows the key benefits and barriers that are often mentioned in management discussions, especially around the public cloud. Weighing benefits and risks is a complicated business/IT decision effort. As a result, many banks tend to get stuck in the either-or discussion: Cloud First, Cloud New or No Cloud strategies. They miss opportunities to create value or begin to take on too much transformational risk.
A more nuanced approach is needed that can enable banks to accelerate their cloud journey in areas where it is valuable.
Instead of starting to consider cloud opportunities at the landscape or portfolio level, we believe banks should first attack the problem at the business domain or application level. For example, applications in the field of trade finance, loans, account management, credit risk assessment, switchboard management, etc. They must then assemble these domain cloud strategies into meaningful cloud portfolio strategies, including which applications should remain on traditional architectures.
There are two major families of strategies. “Green” strategies cover migrations where the main focus is on the technical IT side of the cloud migration and less attention is paid to creating business value. “Blue” strategies focus on the technical and business side of cloud migration and use the cloud paradigm as a catalytic force to drive enterprise transformation.
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We looked at 6 real-life cases of banks in the middle of their cloud journeys and the strategic decisions they seem to have made.
We note that Cases 1 and 2 used “green” IT strategies to move light workloads or for pilot testing before moving to blue strategies. Most of their future development will then be focused on realizing the full business benefits of the cloud. Cases 3, 4, and 5 skipped the “green” strategies and went straight to leveraging the business benefits of moving to the cloud, including rebuilding large legacy systems. In Case 6, the bank decided to essentially build a new bank and phase out its old systems.
Cloud strategies are highly situational and should be tailored based on a bank’s unique characteristics, not as a general “gold rush” for the cloud.
A bank should prepare a detailed cloud strategy based on three pillars: the current application, the cloud services offered by the market (and internally) and the targeted business value.
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About the authors: This article was written by a team of consultants at Associates, a strategy consulting firm based in Denmark. For more information, visit www. A recent study found that only one in four banks in EMEA have created and implemented a holistic, comprehensive digital transformation strategy to engage customers.
The study, published by SAP, also found that while 96% of banks surveyed had completed some form of digital transformation (DKS), there was still room for improvement.
The Digital-Ready Bank survey, conducted by IDC Financial Insights and sponsored by SAP, surveyed 250 retail and corporate banks across EMEA. The findings show that digital transformation often happens only in the front office, creating “islands of innovation” that prevent banks from reaping the benefits of digital transformation at the organizational level. Chief among these benefits is banks’ ability to reduce costs while providing customers with an optimized and personalized experience.
● One in five banks surveyed (21%) currently have a Chief Digital Officer (CDO). IDC believes that one in two will have a CDO, or Chief Digital Officer, driving enterprise-wide digital transformation by 2020.
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● The study showed a positive correlation between early IT involvement and DKS initiative success rates; 57% of the projects in which IT was introduced in the first stages of the DKS initiative were considered successful by the respondents of the bank.
“There is no doubt that EMEA banks are adding value to their customers through digital transformation projects, but I envision a brighter future,” said Laurence Leyden, Managing Director of Financial Services EMEA, SAP. “By blurring the lines between front-office and back-office initiatives and creating a holistic approach to digital transformation, banks can evolve their services with their customers by becoming lifelong partners.”
Jerry Silva, research director for IDC Financial Insights, said: “For digital transformation to become ingrained in a bank’s DNA and strategy, there needs to be a champion – and that is the chief digital officer. The CDO role is still new and maturing, but it should focus on aligning different segments of the organization and different technology processes around one common goal – greater customer engagement and retention.”
The study found that key elements in creating enterprise-wide digital transformation include a culture of collaboration and a focus on a digital core that includes analytics and open, agile technologies. Another key element was the willingness to collaborate with external providers such as FinTech startups, technology providers and non-financial services companies that clients value.
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Other uncategorized cookies are those that have been analyzed and have not yet been classified into a category. Awareness and discussion about the need to reengineer business processes in banks is increasing. This is partly in response to the disruption caused by the pandemic, partly due to macroeconomic pressures such as interest rate changes, and partly as a way to address changing customer behavior and expectations.
This last question is why process reengineering should be customer-centric. Banks should orientate all processes towards clients. Their goal should be to meet customer needs and provide the best possible customer experience at every touchpoint. This includes both price and service throughout the life cycle of each bank customer.
Analytics has an increasingly important role in redesigning the user experience. Banks use predictive analytics based on models using artificial intelligence (AI), machine learning methods and real-time decision engines that consolidate all available customer data. This includes risk assessment, fraud vulnerability analysis and the potential to cross-sell additional services.
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