3 Cornerstones of Future-proof Banking: Cloud Computing, Regulation-readiness, and the Rise of AI
We are living in an era marked by rapid technological advances, fluctuating market dynamics, and evolving consumer expectations. For banks, it means their IT must be future-proof to ensure consistent service delivery, maintain trust, and stay competitive.
Without a resilient and adaptable IT infrastructure, banks risk operational hiccups, security vulnerabilities, and compliance challenges, which can erode customer confidence and result in lost market share. This is especially true for those still relying on legacy IT solutions. In this article, we cover three cornerstones of future-proofed banking and the benefits they offer.
1. Adopting cloud becomes a lifeline
As technological landscapes and consumers evolve, legacy IT solutions in banking are, without a question, outpaced. Cloud computing emerges as maybe the biggest asset behind future-proofed banking IT, offering unparalleled flexibility, scalability, and cost-efficiency.
The flexible nature of cloud technologies allows banks to seamlessly adjust to new technological requirements and business models, while the pay-as-you-go approach promises scalability without unnecessary financial burdens. The cloud’s capabilities in data management enables banks to effectively harness the growing amount of data, translating it into actionable insights.
Moreover, continuous innovations by cloud providers ensure that banks are always aligned with the latest technological advancements and enhanced cyber security. The global expanse of cloud data centers enables operational resilience during the times of geo-political turmoil. And, not to be overlooked, the energy-efficient nature of these data centers positions banks favorably on environmental and regulatory fronts.
In this digital era, cloud computing is not just an option but an essential cornerstone for banks aiming to remain resilient, relevant, and ahead of the curve.
2. Regulation-readiness stems from modern IT
The financial industry is navigating a complex set of new and emerging regulations to ensure both customer safety and operational stability. Modern IT solutions already meet these demands, with built-in flexibility for anticipated changes down the road.
Today’s financial systems grapple with an increasing array of cyber threats, and legacy IT systems struggle to provide robust security. Beginning in January 2025, European banks will be required to adhere to The Digital Operational Resilience Act (DORA), which focuses on IT risk management, incident reporting, and third-party risk monitoring. Additionally, the European Commission has introduced a proposal to revise the Payment Services Directive (PSD3) to address issues such as payment fraud and to enhance consumer rights and open banking features.
These regulatory shifts highlight the challenges banks and financial institutions face in keeping their IT systems up to date. While old legacy systems may be ill-suited to these changes, modern IT solutions provide an adaptable framework, ensuring compliance without the need for frequent and disruptive system replacements.
3. AI gives an unparallel competitive edge
The banking sector is experiencing a technological renaissance, with artificial intelligence (AI) at the forefront of this transformation. AI offers unparalleled predictive analytics, facilitating proactive market trend identification and enabling banks to deliver personalized financial counsel to their customers.
This forward-looking capability is complemented by enhanced security measures; AI’s skillfulness at pattern recognition makes it a great asset in battling cyber threats, as it continuously adapts to counter new forms of cyber threats to ensure the safety of customer assets.
Operational efficiency, and customer and employee experiences will also benefit from utilizing AI. Automated routine tasks streamline operations and allow employees to focus on more meaningful work. Customers, on the other hand, have access to personalized, round-the-clock assistance via AI-powered chatbots.
AI is emerging as the backbone for innovation in multiple industries, and banking is no different. Whether it’s aiding risk assessment, automating back-end processes, enhancing decision-making, or driving product development based on deep customer insights, AI’s contribution is profoundly transformative. Integrating AI becomes mandatory for banks looking to remain in business – something unachievable with legacy IT systems.
Vice President & Senior Partner
Customer expectations, regulations, and technological advancements shape today’s businesses profoundly. The banking industry is under pressure to modernize old IT systems. Many banks have tried to modernize their IT in one massive project – only to see it fail. Smart transformation craves an incremental IT strategy.
We put together a guidebook to help you with financial regulations, cyber security, and customer expectations.Download our free guidebook