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Selecting the right digital core banking platform is a major step forward, but successfully implementing and integrating it in the cloud is the final significant step towards becoming digital and fully configurable with automated deployment. This step often proves to be a challenge for banks.

 

Cloud-based core banking is still relatively new, but it is set to become more mainstream. It increases efficiency, security and cost savings. You can refocus your resources to better understand and serve customers, rather than maintaining old technology or managing difficult integrations to legacy systems. 

Cloud-based core banking

What is a Cloud-Based Core Banking Platform (SaaS)?

Cloud computing is a proven solution to many core banking problems, like interoperability, 24x7 uptime, secure storage, allowing banks to focus on their business while their vendor takes care of running their IT landscape etc. Despite these benefits, banks and financial institutions still show hesitation in adopting cloud-based offerings, citing potential security concerns. However, state-of-the-art SaaS solutions offer a level of security that meets or surpasses on-premise platforms.

Opting for a SaaS platform enables you to spend more time and money on the parts where you can make a difference for your clients instead of focusing on IT and security issues. To ensure viability, we believe that a cloud-based core banking platform is essential. In fact, we can safely say that the effective
adoption of the cloud will be a pivotal factor in deciding who emerges on top and who falls behind their competitors in this new age of digital banking.

Banks are racing to take advantage of the opportunities and manage the risks that the digital economy creates. To do so, a cloud-based core banking platform that provides greater agility, scalability and flexibility is a necessity.

Step one is replacing legacy systems with a new digital core banking platform. The next step is deciding how you want to implement the new core banking system. 

Migrating core banking systems on the cloud presents the bank a rare opportunity to achieve conflicting objectives at once:

  • Reducing costs: Fixed subscription fee with no hidden or other associated IT maintenance or server hardware, power consumption, and space costs
  • Increasing agility, flexibility, and scalability: With configurable components and product builder, banks can tailor products and services across all channels
  • Accelerate growth: Automate operations and workflows, which results in increased efficiency, security and cost savings

Effective adoption of the cloud will be a pivotal factor in deciding who emerges on top and who falls behind their competitors in this new age of digital banking

The key differences between cloud and on-premise

It is no surprise that cloud-based core banking has grown in popularity as much as it has, as its allure and promise offer newfound flexibility for banks — from saving time and money to improving agility and scalability. The primary key differences are:

Infrastructure
In an on-premise environment, resources are deployed in-house and within your bank’s IT infrastructure. You are responsible for maintaining the solution and all its related processes. In the cloud, resources are hosted on the premises of a service provider. However, you are able to access those resources and use them at any given time. There are no capital expenses and data can be backed up regularly. It allows you to connect with customers, partners, and other businesses with minimal effort.

Cost
When you deploy software on premise, you are responsible for the ongoing costs of the server hardware, power consumption, and space. When you use a cloud-based model, you only need to pay a fixed fee to the SaaS provider. It offers you the ability to reduce system maintenance costs, which lowers legacy technology worries. This allows you to spend budgets on innovation, customer satisfaction and growing the business.

Security
As a bank, you must have a certain level of security and privacy. Security concerns remain the number one barrier to a cloud-based solution, which an on-premises environment provides. However, in a cloud environment, high levels of security are ensured, and others can’t access the data as most cloud providers ensure proper isolation of data per client. It is hard to let control go to another party when it comes to security, but cloud providers have huge teams that dedicatedly work on security and that is something that a bank can never match themselves.
• A very high level of automation, which results in the cloud solution provider being able to maintain a zero touch environment without human interaction.
• Multi Factor Authentication to perform administrative tasks.
• Privileged Identity Management to make changes that require elevation of permissions and manager approval.
• Encryption at rest and in transport using the most secure encryption protocols.

Compliance
Banks are subject to regulations and it is imperative that banks remain compliant and know where their data is at all times. When opting for cloud-based banking, you must ensure that your provider is up to date and compliant with all of the different regulatory mandates in the banking industry. When they are, it saves you a lot of work compared to an on-premise environment where you have to stay updated with regulatory changes yourself.

Best practices for adopting cloud-based banking

If you are an architect at a bank and you are considering adopting a cloud-based core banking system, what do you need to keep in mind?

1. Gather information and talk to other financial institutions
Immerse yourself in the fintech world and explore the opportunity of cloud-based banking. Why? Reading about it and talking to others who have already implemented cloud computing is a great way to know what options you have and what it brings you. It helps you to decide what the best solution for your bank is.

2. Finding the right partner
Finding and selecting the right partner is a critical element of making the switch to digital core banking in the cloud. Essential questions to ask yourself are: Is there a cultural fit? Is the platform based on modern, future-proof technology? Do they have an innovative character? Have they a proven track record? And can you connect with a fintech ecosystem to leverage fintech innovations and expand into new markets? 

3. Perform a risk assessment
When you have found your partner, it is important to perform a risk assessment. Based on assessment criteria, examine the organization and the chosen solution to evaluate hazards and to determine whether the selected core banking system is the way to go.

4. Designing and testing workflows
You want to ensure your business processes are inline with the core banking platform. Therefore, it isvital to design and test workflows with your vendor. Creating a proof of concept is an efficient way to do so. It gives you the possibility to see and experience how a specific element works, to test demarcated functionality and to determine if the selected vendor can help you achieve your goals.

Best practices for adopting cloud-based banking