Many banks are starting to ask themselves, “is ‘cloud-native’ banking technology really transforming financial services, or is it just clever rebranding?”
A new generation of financial services vendors is promising a revolution in cloud-native technology. In reality, the majority are just moving old systems to new environments, providing a mere shadow of the true capabilities offered by truly cloud-native solutions.
As a result, not all ‘cloud-native’ banking systems are created equal. While some fully embrace and utilise the real-time data and flexibility that being born in the cloud delivers, there are several players who are rebranding their old legacy systems by giving them a digital facelift with little real benefit. In short, they are cloud-washing.
Cloud-washing can have a seriously detrimental effect on banks. Last year, research revealed that while 60% of UK banks have migrated core banking systems (CBS) to the cloud, more than half (51%) failed to meet their goals. Even after cloud adoption, 57% struggled to implement changes or launch products as quickly as expected, and 41% still lacked access to essential data. This means banks with sub-par core banking will struggle to deliver personalised products and meet customer needs.
So, the challenge for banks is: how do I spot a cloud-washer?
If you have a cloud CBS, stop and think back to when you implemented it. How much did you pay for system setup? And how long was your deployment and onboarding phase?
A clear sign of cloud-washing is when significant cost is attached to CBS setup – and any further customisations – because these are difficult, lengthy processes in a legacy CBS. Deployment times are also inflated because these “cloud” systems are not plug-and-play and instead take time to integrate into existing tech infrastructure.
An API-driven cloud-native model will avoid these hefty upfront costs, as there is no need for banks to pay excessive amounts for hardware and software licenses. The newest generation of cloud-native systems even allow for a service-based payment model, similar to Salesforce, during the selection phase. This model will further reduce setup costs and encourage experimentation and innovation, which offers a major benefit for smaller banks.
A hallmark of a legacy CBS is a lack of flexibility. Innovation often stalls because banks are locked into vendor-imposed frameworks with little room for customisation. This inflexibility can slow product evolution to a crawl, making it near impossible to launch new offerings at speed. As customer needs shift, banks find themselves unable to keep up. This isn’t because banks lack ideas, but because their CBS simply can’t adapt.
