Reported by: banking|Updated: September 14, 2020
Hybrid cloud is a preferred solution, say CTOs of banks, but hesitate in adopting it for want of regulatory guidelines:
Financial services institutions have come to acknowledge that customer experience is a key factor that makes or mars a business proposition and professionals in the domain majorly feel that responding to customer expectations faster is crucial for winning a customer. Banking customers often compare their experiences not just with a competitor bank but with other service institutions and banks very well know it they need to attract and retain customers; they have to have well laid out processes in place to enhance the customers’ experience with the organization. Unfortunately, there are only few banks and other financial services institutions that have any formal plan to enhance customer experience. Most of the organizations count on internal benefits rather than what the customer could have through a better experience so that he remains with the organization.
Typically, customers of financial services institutions are becoming both digitally savvy and also well informed about various financial products and shopping around has become the norm. There should therefore be key CX parameters for banks as they plan to upgrade the customer journey.
Milind Varerkar, General Manager – IT Depardpent, Saraswat Cooperative Bank, defines customer experience as an amalgamation of all the interactions taking place with the customers throughout her life cycle with the bank. In the financial service industry, according to him, CX happens at multiple channels like digital channels, call center, social media platforms, etc and there is a need to first meet the customer expectations to create a delightful CX.
“The customer is today digital savvy and expects the bank to provide the products and services without delay. This necessitates that we also adopt newer approach to the technology. For new applications we are adopting agile method of software development rather than waterfall method. This way the applications are developed faster and lead time is reduced considerably. The customers are preferring mobile based services only and expects an easy to navigate app. We also have responded by making simple to use mobile banking app which offers unique services such as cardless cash withdrawal at ATM, QR code- based payments, etc. We also have launched mobile app for account opening by doing eKYC. This eliminates need for customer to visit bank for opening savings account. Today’s youth is spending on average 3-4 hours on his mobile device and more specifically on social media apps. Saraswat Bank has extended banking facilities to its customer through WhatsApp,” he explains.
Vishal Rathod, CIO at NKGSB Bank, points out that over centuries, banks have evolved from simple money vaults to more complex digital banks. With this the customer expectations from the banks too have increased manifolds. Today customers demand lot more than just basic banking products and services, he says, emphasizing that banks will need to follow first principles, to design financial products and services from scratch.
“The focus will be to understand the changing customer priorities and behavior by analyzing the available data. Few of our future focus areas in CX space will be AI based financial advisory, virtual personal assistants and multi-model biometric transaction authorizations. The technologies such as AI, ML and Deep Learning will help us deliver these experiences to our customers. The IT infrastructure will need to be Hybrid Cloud based where resource scalability, interoperability, cybersecurity and governance policies will be AI driven,” he says.
ROLE OF DIGITAL TECH
Ritesh Gupta, Regional Director, India West, Nutanix, explains that digital technologies will fundamentally change the economics and competitive landscape of the banking sector. Digital transformation is driving profound changes in financial services across verticals such as banking, securities or insurance, says he, adding: “Organizations must respond with strategies to deliver improved growth, speed, efficiency, innovation, security, and regulatory compliance across front, middle, and back offices.”
Pointing out that with surging competition from fintech companies and rising regulatory pressures, BFSI companies are making consumer experience a priority, he says as customers become accustomed to shorter response times, efficient data management becomes key to a better customer experience. “With increased simplicity, shorter response times and governance of data, multi-cloud adoption will gain importance. Most financial services companies expect their IT environments to be multi-cloud, making integrated use of both on-premises and externally hosted cloud infrastructure. The agility, scalability, and simplicity of use that comes with HCI and cloud make these technologies long-term allies for FSI companies looking to deliver superior customer experiences,” says he.
Ritesh Gupta points out that Nutanix Enterprise Cloud provides a single point of control for a company’s applications and data across all their cloud platforms, which enables IT to meet cost, security and SLA requirements set by the business.
USE OF CLOUD
Are banks still using traditional 3-tier architecture for any new applications and what about use of cloud architecture for development of new applications?
Varerkar says the architecture framework for any application is mostly governed by the OEMs and the underlying application. “We at Saraswat Cooperative Bank have been deploying a good mix of applications which follow the traditional 3-tier architecture since not many banking applications are cloud ready. While we have embarked on the cloud journey by deploying various applications such as email, HRMS and lead management system on the cloud architecture, this is still minimal of total applications which are being rolled out, says he.
He also mentions that non-critical applications and testing environment have been deployed at the cloud which provides the flexibility to scale based on the requirements. Hybrid cloud, he says, has emerged as a win-win solution for addressing the concerns surrounding public cloud and benefits of private cloud. “In the near future we will explore which all business applications can be deployed on the hybrid cloud architecture based on our policy and perceived returns on investment,” he adds.
NKGSB Bank’s IT landscape is a complex mix of traditional multi-tiered architecture applications and cloud-based applications as well, admits Vishal Rathod. One must agree, he says, managing multiple architectures becomes painful over a period of time, as it requires high manpower and various skillsets ultimately resulting in cost escalations and security concerns.” Considering all these, we have embarked on the journey of adopting hybrid-cloud architecture for our bank. Important aspect is breaking down major banking application processes into microservices and moving them on the cloud.
Ritesh Gupta of Nutanix points out that as more companies move towards improving their IT systems, cloud computing platforms are now becoming a part of mainstream IT. Businesses are beginning to understand this can be a path to achieving agility, cost savings, greater application performance and availability, as well as access to emerging technologies, says he.
The latest Nutanix Enterprise Cloud Index survey for the Financial Services Industry found that the flexibility to move applications as needed is a critical requirement for the sector. Additionally, nearly three quarters of financial companies surveyed (71%) shared their plans to move one or more applications running in a public cloud back on-premises. Ritesh Gupta says, “More and more businesses are looking to invest in cloud, both as a means of cutting existing costs, and as a means of developing new revenue streams. The Nutanix hybrid cloud infrastructure helps firms in the BFSI vertical with simplifying IT, which is hosted on-premises, automating lift and shift migrations between on-premises and public clouds, and eliminating the complex process of rebuilding virtual infrastructure for new clouds.”
Startups and fintechs prefer cloud-based solutions yet banks and traditional financial services organizations have a cautious approach in this regard. Yet, hybrid cloud architecture could be a potential solution.
Vishal Rathod of NKGSB Bank argues that the DNA of fintechs and startups and traditional Indian banks are completely different and this difference can be seen in the selection of board members, business strategy, customer expectations, adoption of technologies, etc. “I personally advocate hybrid cloud architecture as it helps me to effectively strike a balance between regulatory and customer demands. It also helps me move from traditional monolith architecture to microservice architecture, resulting efficient delivery of online services with optimum utilization of hardware resources. I can scale up and scale down any banking microservice on demand. With the right mix of technologies such as SDWAN combined with hybrid cloud infrastructure, one can surely be ready to beat any kind of competition. It will not matter if you are public sector, private sector or cooperative bank,” he stresses.
Varerkar of Saraswat Cooperative Bank too points out that hybrid cloud is emerging as a likely solution for deploying applications, which need to be timed for market and which adopt an agile methodology. It also facilitates various innovations and scale, which can be leveraged by startups and fintechs for creating technological solutions to address business problems, says he.
He adds: “The future of banking is about collaborations. Many innovations are coming from fintechs and the future seems to be API banking. Hybrid cloud enables faster rollout, provides the ability to preserve critical data within the purview of the bank and minimizes the risk of compromises. Applications processing non-critical data, testing applications and security applications can be deployed on the hybrid cloud architecture.”
HYBRID CLOUD PREFERABLE
Ritesh Gupta of Nutanix underscores the fact that both public and private clouds provide benefits for financial services institutions, but to truly gain a competitive edge, these institutions should look to a hybrid cloud infrastructure. He says the pace at which financial services firms adopting cloud platforms is a strong indication of their intent to rely on these platforms to build new services and modernize existing operations.
“Multi-cloud architectures that incorporate private or dedicated infrastructure components are a means of achieving the benefits of agility, cost and performance while addressing security and compliance challenges,” he adds.
As many organizations turn to hybrid cloud environments, he is of the view that application architectures will have to be redesigned from high availability to a continuous availability model. Application deployments that are available across multiple clouds can deliver on the requirement for a cost-effective hosting option.
Container-driven application portability in a hybrid or multi-cloud IT architecture will enable the multi-directional movement of workloads to the best execution venues on an ongoing basis and this can help in the optimization of cost and application performance.
He also points out that many financial services firms predict the large-scale migration of workloads to public cloud, making containerization of legacy applications a necessary step in the process.
“Containerization of new, cloud-native applications is necessary for those applications to benefit from multi-cloud architectures. Cloud also provides an important platform on which customers have the ability to experiment with technologies such as AI and blockchain. Cloud platforms can eventually also be used to execute the results of these experiments. It can equip organizations with the speed and agility to bypass the often cluttered and complex processes of traditional hardware-based IT infrastructure, without significant upheaval, disruption, or cost. It’s a solution with a proven track record, especially within the BFSI industry,” Ritesh Gupta elaborates.
He says there has been an increasing shift in the way banks are looking at technology in order to meet requirements of business, risk, compliance etc. “Banks are no longer looking at themselves as ‘banks’; they are now seeing themselves as technology companies with a banking license. CXOs in BFSI companies are now leveraging the benefits of technology, and hybrid cloud, to prepare their organizations for the future. CFOs play an important part in this digital transformation – they can help drive higher valuations by focusing on cloud-enabled change in their business platforms,” says he.
Ritesh Gupta also emphasizes that cloud should be an important part of the plan for organizations focusing on improving agility and innovation. Multi-cloud adoption has numerous benefits like it reduces time to market, increases scalability and presents a new way to drive agility and innovation. Another big benefit is consolidation of
REGULATORY VIEW ABSSENT
Varerkar of Saraswat Cooperative Bank says the absence of clear mandate and directives from the regulator creates an ambiguous adoption for cloud. He explains the situation: “Risk, information security and compliance, which define policies and practices based on the regulator guidelines, do not find any relevance for inclusion of cloud as a strategic initiative. This usually creates a non-agreement between various stakeholders while introducing applications on the cloud architecture. I believe there would be a slow convergence among all stakeholders for adoption of cloud unless specific guidelines are issued by the regulator and policies are framed around it.”
Cloud based technologies have been around for some time now and most CXOs do have basic understanding about pros and cons of it, says Vishal Rathod of NKGSB Bank. Most of the debates involving banking CXOs is about security, compliance and ROI, he says, adding regulators also like to play extremely safe by not advocating any technology. “This leads to boardroom debates about cloud adoption remaining mostly inconclusive. In such cases, the job of CIO becomes crucial as he has to play the role of technology influencer in his organization,” he says.