For financial companies who are struggling to deliver new applications at speed, getting on board with the cloud revolution is a great way to keep pace with evolving consumer demands.
Those who recognize the benefits of embracing a cloud strategy to best serve customers have started the process of moving critical operations to the new environment. However, for specific applications, taking a cloud-native approach is a good way to make the most of the cloud’s elasticity and scalability while reducing costs, boosting performance, and increasing business velocity.
But are banks taking advantage?
Cloud adoption challenges for financial services companies
The rapid pace of digital transformation is compelling companies to speed up the process of application development and deployment. This is particularly true in the financial services sector, where new-age fintech startups are disrupting and capturing the market through the use of modern technology. Although the sector has been witnessing a good deal of innovation in the last couple of years, two major roadblocks come in the way of cloud adoption:
- Regulatory compliance: The sector, being one of the most highly regulated ones, often struggles to provide access to data and systems to regulatory bodies. With new regulations constantly underway, enabling governance remains a significant barrier to cloud adoption.
- Archaic back-end applications: The legacy application stack that most financial companies own was not built to handle the scalability, agility, and availability demands of the cloud-era. The rigid structure of legacy applications makes it difficult for companies to enable integration and data access through cloud migration.
How a cloud-native strategy can work in their favor
To adapt and respond to changing customer needs, financial services companies are beginning to consider moving critical workloads to the cloud. Although historically, the sector has been apprehensive about cloud adoption, there has been a significant change in attitudes toward cloud security and the storage of data in the cloud. This shift in attitude has made it easy for the sector to consider a cloud-native strategy.
Cloud-native applications are inherently designed to meet the requirements of the financial services industry, namely: compliance, data security, and resilience.
An amalgamation of microservices, containers, and Kubernetes, cloud-native applications deliver the agility, flexibility, and elasticity required to meet the demands of a modern world. By architecting hybrid applications with cloud-native front-ends, companies can overcome common cloud adoption challenges and keep pace with customers’ expectations from banking services.
- A cloud-native strategy allows financial companies to decompose monolithic applications into easily consumable domain-specific business transactions.
- It offers great scalability for core banking systems and is ideal for applications that require specialized skills to develop, use tools/frameworks with high licensing costs, and are maintenance intensive.
- Such a strategy works especially well for monolithic banking applications that need to be completely rewritten for a modern language and framework.
- Organizations striving to remove complex non-core functions from their mainframes can use a cloud-native approach to move modern applications into cloud-based microservices applications.
With a cloud-native approach, companies can:
- Allow developers to work independently at their own pace (and in their own development environment) and build apps based on customer requirements and expectations.
- Build new applications using new architectures, rather than rebuilding on top of the legacy stack, and experiment with new features – without impacting the performance of critical revenue-generating applications.
- Automate the process of deploying, scaling, managing, and maintaining applications and leverage benefits across platform independence, isolation, resource efficiency, and speed.
- Overcome inconsistencies in environment configurations and drops in quality levels as applications scale and increase business velocity with applications and services built for the cloud.
- Move towards an API ecosystem to deliver innovative, hyper-connected services for customers while complying with emerging regulations and building a platform for future growth.
- Enable rapid deployment and updating of applications while enabling auto-scaling of applications and maximizing resource utilization.
What they need to keep in mind
Moving applications to cloud-native architecture isn’t a small undertaking. Companies have to plan the migration very carefully. They need to:
- Prioritize which applications they want to consider for cloud-native strategy, which of them can actually be moved, and which would need to be re-architected or re-built for the cloud.
- Understand the scalability requirements for each application and choose the best mechanism for autoscaling.
- Evaluate integration capabilities required for cloud-native applications to interact with monolithic core banking system applications.
- Understand the frequency of application releases and assess changes that will be required to be made to the development, QA, and release processes to align with a faster release schedule.
Transform the sector for greater agility and flexibility
As financial services companies look to drive flexibility, accelerate product releases, and enhance customer experiences, they need to adopt the right technology strategy to achieve this transformation. Traditional monolithic applications can severely restrict enterprise agility and impact competitiveness and regulatory compliance. Embracing a cloud-native, microservices-based architecture allows companies to rapidly adapt and develop new business models in the most efficient way possible. So, start building a cloud-native strategy today to ship products faster, reduce operational risk, and grow your business.