Powering deposits in the cloud: New era of banking

Today, traditional banks face pressing challenges, especially when it comes to deposits and accounts. There are several reasons, including cyber threats, new market entrants, and evolving consumer expectations. Customers are increasingly tech-savvy and looking for hyper-personalized data-driven products and services. Moreover, they’re less hesitant to switch providers.

At last year’s Sopra Banking Summit, a range of experts discussed actions incumbents can take – most notably, leveraging the power of the cloud.

Banking pain points

In terms of managing deposits, banks experience issues like controlling costs and rising cyberattacks. According to Eric Bierry, CEO of Sopra Banking Software (SBS), 95.5% of customers’ interactions with banks are via digital channels, increasing potential entry points for cybercriminals.

Artificial intelligence (AI) is used in the fight against cybercrime, but also fuels attacks, opening new doors for hackers and enabling the automation of tasks at scale and more sophisticated phishing. At the same time, the rise of open banking and finance and embedded finance increase data-related threats like fraud.

Inflexible legacy systems also pose a challenge. To cope with industry demands such as real-time transactions and analytics, additional layers like web services and REST (representational state transfer) APIs (application programming interfaces) are added to existing core platforms. The result is a “lasagne architecture”, says Yves Houbeau, Senior Technical Architect at SBS.

With “the world going instant for all operation types, the expected response time is very difficult to achieve,” he adds. Meanwhile, maintaining a multi-layered lasagne architecture and keeping it secure is costly, requiring cross-technology expertise.

Cloud to the rescue

Ben Andrews, Senior Solution Architect at SBS, advocates the cloud as a solution: “It speeds everything up” and helps banks unload some IT burdens they currently own.

There are numerous offerings for banks to consider, depending on the level of control they want to maintain: Infrastructure-as-a-Service (IaaS), Platform-as-a-Service (PaaS), Software-as-a-Service (SaaS), and increasingly, Banking-as-a-Service (BaaS). By migrating to the cloud, banks can concentrate on their core business and how to differentiate themselves in the market. 

Moreover, the cloud is battle-tested when it comes to security, with providers investing significantly. For example, AWS offers the Well-Architected Framework, helping cloud architects “build secure, high-performing, resilient, and efficient infrastructure for a variety of applications and workloads”. On top of that, the cloud delivers secure data storage, full auditability, and the capability to integrate with AI and machine learning tools.

What’s more, with data privacy a pressing concern and the advent of regulations like the Digital Operational Resilience Act (DORA), the cloud can help banks remain compliant with complex and evolving rules. According to Deloitte: “Cloud solutions can conduct intraday liquidity and risk calculations and mine trade surveillance data to detect anti-money laundering and other fraud issues.”

Additional benefits of the cloud noted by Andrews include:

• Easier to run automated test suites and implement continuous integration/continuous delivery (CI/CD).
• Ability to experiment faster with new features, meaning a quicker time to market.
• Shortens the development, test, delivery, and learning cycle, helping banks become properly agile as an entire organization.
• Using only the resources and infrastructure they need reduces the environmental impact.

The cloud also has an “evergreen approach” – patching is automatic and regular. Another advantage is resilience, with out-of-the-box disaster recovery baked in. Furthermore,  costs can decrease in the following ways:

• Cloud usage is scalable and elastic and charged on a pay-as-you-go basis.
• Much of the underlying infrastructure is maintained by the cloud provider, lowering the human cost within the bank.

Studies by AWS and SBS’s experience with its cloud platform reveal a 25% IT spend reduction, 50% higher resilience, a 55-65% rise in productivity, and 35% improved agility.

Cloud: Reducing barriers to entry

As a result, digital-native players are entering the market, leveraging cloud technology to provide enhanced and more bespoke deposit and savings services – a potentially daunting situation for traditional banks that still use outdated and monolithic legacy systems. What’s more, new entrants don’t play by the same rules as banks regarding regulations and compliance.

Banks can even the playing field by making the most of the cloud and all it offers. It’s also about retention and loyalty via improving the customer experience and attracting new clientele by differentiating from the competition. This multi-pronged approach retains and increases deposits.

SBP Digital Core and the cloud

Sopra Banking Software saw the cloud as an opportunity to deploy its core banking solution. To benefit from all it offers, we reviewed our entire architecture. From there, we rewrote the core banking solution for accounts and deposits, using the latest technologies:

• Cloud-native.
• Cloud-agnostic.
• Event-driven.
• Microservices approach.
• Reactive manifesto.
• Open-source technology.
• Zero-trust security.

Banks that partner with us can leverage the capabilities of our Digital Core solution on a standard, ready-to-use basis.

Transform deposits with the cloud

In a constantly evolving technology landscape, the cloud allows banks to keep pace, reduce costs, and increase resilience, productivity, and agility. According to the Cloud Security Alliance, 98% of financial institutions use some form of cloud computing, up from 91% in 2020. It’s no longer a question of whether to adopt the cloud, but how.

Watch the “Powering deposits in the cloud: New era of banking” Summit session in full here.

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