Cloud-native banking: Transforming financial services with innovative technology

Cloud-first financial institutions are transforming the banking world to meet the needs of a digital generation that prefers not to go to a branch, avoids paper for transactions and has leaned into mobile payments for day-to-day transactions.

This change in financial services is the extension of a smartphone-centered culture, where mobile has become the banking platform of choice for many people. A recent study from the data research firm PYMNTS found that millennials and Gen Z users rely on mobile banking five times more than their parents, and 58% of retail banking customers reported smartphones as their go-to devices for online financial activities.

Data points such as these illustrate a key transformation taking place in the banking industry. A new infrastructure based on cloud computing is driving the delivery of products and services to customers. Cloud-native banks have built digital banking solutions at a rapid pace and more traditional banks are modernizing and migrating to a new technology stack.

“Banking is changing quickly — banks will have enhanced customer experience and propositions with their ability to leverage on data-driven insights and decision-making, innovation in product development, lower cost of run with the adoption of cloud-based solutions, operational efficiency enabled by automation of tasks and processes, agility and scalability in its operations,” said Nalin Sinha, managing director of sales, APAC, at Thought Machine, in an interview for this story. “This will enable 24/7, always-on service with high operational resilience for banking customers. High levels of configurability will allow banks to build, launch and manage any type of financial product.”

This article is part of SiliconANGLE’s ongoing exploration of cloud modernization trends. This piece highlights key developments from Amazon Web Services Inc. and AWS Partners. AWS is the sponsor of this ongoing article series.

Redefining banking with cloud-native technology

An example of how the financial services world is rapidly being transformed can be found in Trust Bank, Singapore’s first digitally native bank, backed by a partnership between Standard Chartered, which has more than 160 years of experience in Singapore, and FairPrice Group, the country’s leading grocery retailer. Within a year of its launch, Trust had acquired over 600,000 customers — or 12% of retail banking customers in the market — and positioned itself as one of the world’s fastest-growing banks. The  financial company launched its digital-only platform in September 2022, with support from GFT and Thought Machine running on AWS.

“In this market, we’ve seen a lot of digital challengers fail because they thought it was all about technology, where it’s about being a bank,” Sinha said. “Technology in banking is about figuring out how banks will serve customer needs better. Trust has gotten it right because they created new stacks with bank knowledge.”

Using Vault Core, Thought Machine’s core banking platform, Trust scaled rapidly following its launch. Vault Core’s Universal Product Engine offers flexibility and control in designing and deploying new financial products through smart contracts written in Python code.

“Vault Core allows Trust to respond quickly to market conditions and customer expectations while scaling development, test environments and loads, and optimizing stability with steady costs,” Sinha explained. “Trust launched with not just one product, but several – a credit card, savings account and family personal accident insurance, alongside a loyalty reward program integrated with the FairPrice ecosystem.”

By being embedded in FairPrice Group’s ecosystem, which delivers more than 1 million customer experiences across the country every day, the bank achieved incredible engagement rates. On average, customers use their Trust credit cards 21 times each month.

More recently, GFT and Thought Machine have announced plans to accelerate digitization initiatives for U.S. banks and, through the collaboration with AWS, launched BankLiteX, which enabled the startup of greenfield banks in as little as three months.

Customer-centric banking for the digital age

Not only did Trust launch its products and services rapidly, but it also created a new standard of customer experience for digital banking. Using the app, Trust clients could take advantage of various offerings in far less time than it took in the traditional banking world.

“Trust Bank set a precedent for financial services by onboarding an individual and delivering a credit card to them digitally on their phone within four minutes, creating a seamless digital onboarding process for new customers,” Sinha said.

The entire process, which used to take days and sometimes weeks, now takes minutes, according to Antonio Camacho Hubner, head of new business and head of banking and FSI, APAC, at GFT, in an interview for this story. 

“That is the fundamental approach to digital banking,” he said. “It’s a combination of technologies that are enabled by cloud, open API-based solutions and microservices.”

This new paradigm represents a significant change within the banking world itself. Prior to cloud-native and the smartphone, banks defined the fundamentals for how products and services would be delivered to customers, according to Camacho Hubner. Trust and other digital banks have created a platform that is personalized to its customers.

“Things have changed because we design banks mainly with the customer in mind,” Camacho Hubner said. “Trust Bank was tailor-made for Singapore. This offering is very appealing to consumers who don’t want to deal anymore with branches or paperwork; they only want to deal with an app.”

While Trust still offers customers physical cards, and its customer base is well-distributed across age groups, the whole business model is changing, Camacho Hubner added.

Infrastructure and cloud computing in digital banking

One key way the business model changes involves the banking industry adopting the cloud. In Trust’s model, Thought Machine’s Vault Core enables the development of financial products as code using a smart contract system. Rather than being dependent on a third-party vendor for its product line, Trust’s direct ownership of the development process allows it to make changes and deliver new features significantly faster than traditional banks that rely on legacy systems.

The underlying AWS infrastructure enables this. Vault Core runs the container orchestration tool Kubernetes on Amazon Elastic Compute Cloud and leverages Amazon RDS for PostgreSQL to manage mission-critical transaction data. Trust also uses Amazon Elastic Kubernetes Service and cloud-native Kafka to drive its platform.

“The tech stack is the baseline for digital banking, and cloud is paramount,” Camacho Hubner said. “Cloud is a main enabler here.”

This confluence of technologies has propelled Trust and other digital banks into the competitive picture within the financial community. An analysis released by Bain & Co. found that banks leading in the adoption of technology solutions delivered an average of five percentage points higher total shareholder return, 10 percentage points lower cost-to-income ratio, and 12 percentage points higher Net Promoter Scores than their peers.

“There is really a first-mover advantage in the digital space,” Sinha noted. “I don’t think incumbent banks will disappear in the next 10 years. I think the risk picture has changed, the competition is changing, and technology brings a genuine shift in the competitive business space.”

As this competitive scenario plays out, one factor likely to determine success will be whether customers continue to migrate to digital-only banking platforms. The customer experience will be a key element, and generative artificial intelligence is poised to also make its mark.

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