Financial services are changing fast — and you must transform to keep up
Rackspace Technology Staff
Disruption is everywhere in financial services. Startups and digital natives unencumbered by legacy technology and traditional thinking are changing the rules of the game. Banks clinging to the status quo risk becoming uncompetitive or even losing market share.
For banks to survive — and thrive — in this challenging environment, they’re turning to cloud technology and digital transformation. But this doesn’t just mean number-crunching and speed. Banks must become a service. “It’s really interesting what people mean by ‘digital transformation’ — for us, it’s all about the customer,” says Rackspace CTO Lee James. He believes banks must look beyond transactional services, to providing “an experience for each of your consumers.”
Put customer experience at the center
User experience is at the heart of many new entrants in the financial services space. For example, Apple Card minimizes complexity in its interface, simplifying tracking spending habits and helping people understand how to balance payments and interest. And Cleo uses interactive features like a fun chatbot, in-context vouchers based on existing spending, payday alerts and more.
As Lee notes, what these modern services have in common is very clearly showing “how you’re spending your money.” So instead of perusing balance sheets, you get insight to better manage your money. This promotes loyalty to the bank or financial service because customers are getting something of real value that’s customized to them. “Hyper-personalization is absolutely key,” says Lee, “and it’s winning new customers.”
Build the experience from the ground up
Competition from digital natives combined with rapidly evolving expectations from users — who now demand a new kind of digital engagement — presents a challenge. Traditional banks and financial services are aware of a need for real and meaningful change, but enacting it is not easy.
“For an established bank, making this adjustment is really difficult, because their internal [legacy] systems don’t lend themselves very well to that level of change,” explains Rackspace Solution Director Rhys Sharp. By contrast, challenger banks are “typically not encumbered by legacy infrastructure, and so can react a lot faster.”
This heaps even more pressure onto established players. How do you keep pace? How do you modernize the backend and customer experience? How do you scale and deliver new services at speed, and have the right people to support that change?
“This isn’t about just taking existing processes and enhancing them,” affirms Lee. “Instead, organizations must build brand new, because data flows need to be changed and infrastructure needs to be set up.”
Get there faster by leaning on experts
Adjusting a banking system in place for decades, and the company itself — with its own rich history within the industry — is hard. One obstacle is different IT speeds. Established environments that support core banking tend to run at a slow pace, along with its governance.
“But with cloud, innovation is much more rapid, and so the culture has to go with that,” says Rhys. Yet as Rackspace Solution Director Tim Bull adds, “Banks can struggle to attract the right kind of talent [to support such change] — those engineers and architects and support people who know cloud really well.”
According to Rhys, the time to start working on solutions is now: “The pace isn’t [slowing down] — it’s probably going to increase, and we’ll see more adoption of cloud.” He believes the use of expert managed service companies and expert consultancy can successfully help banks adopt new cloud environments with greater urgency, thereby far more rapidly unlocking the potential to innovate at speed — but without negatively impacting on their core business.
Unlock a new way of working
As for the financial services companies Rackspace has worked with over the past year, “[They] are really ramping up talent acquisition and training. It’s great to see such a lot of activity,” Tim notes. And such activity presents opportunities, allowing these companies to reap benefits, such as lower costs through right-sizing infrastructure and turning off things that are no longer needed.
The biggest change, though, is in unlocking that all-important different way of working. “Cloud technology in the banking space is enabling people to trial and test, reach new markets and understand the costs of those new markets — to try new experiences, and understand you can scale on-demand,” says Lee. There’s a sense that traditional players can now keep pace with challenger banks. “We’re talking hundreds of releases a month versus potentially just a few a year,” explains Tim. “That’s great for consumers.”
Weave security into your new projects from the start
Even thornier issues are being deftly dealt with. “We’re seeing people building for regulation and security right from the beginning — not as an afterthought,” says Rhys. “So when developing new systems, they’re doing so with regulations in mind.” And in looking to hybrid platforms rather than investing solely in one platform, Tim says companies gain “a degree of old-school safety and resiliency,” resulting in a “more robust and assured service to safeguard the consumer experience.”
All this bodes well for an industry where establishments, IT environments, core systems, governance and people have traditionally run at a slow pace. Now, the pace can be — and increasingly is — much faster, enabling innovation without sacrificing security, resilience and trust.
Get ready for a bright future
But as Lee notes, today’s cutting-edge will quickly become convention: “There’s going to be a huge demand on cloud technology and organizational change. But banking as a service will move from being exciting and new to just the norm.”
Miss out and you risk decline. Get on board and you’ll have to manage rapidly evolving requirements for things like data security: “Now we have that deep knowledge of every single consumer, we must keep it protected and understand how it’s being shared, especially across boundaries,” says Lee. Again, partnerships can help banks more easily navigate this constantly changing environment.
His overriding view of the future of financial services, though, is one of great positivity. “I’m just terribly excited! I love the idea of AI and machine learning understanding my behavior and habits, giving me hints and tips, and actually making it quite fun along the way as well,” concludes Lee. “It’s a great thing that we can say the banking arena and financial services arena are going to make us smile. I really look forward to that.”
Take the next step
How will make your financial services customers smile? By turning to the cloud and adopting artificial intelligence, blockchain, Internet of Things and other emerging technologies, you can adopt new, innovative ways of delighting your customers — and stay ahead of your competition.
Learn more about the financial services evolution and how you can successfully transform in our white paper, “The critical role of the cloud in digital transformation and operational strategy.” You’ll discover how the challenges of today’s fast-moving market are forcing innovation, the impact of legacy infrastructure, and the benefits of the cloud and partnering with experts. This guidance will help you on your cloud journey, so you can reduce costs, improve security and management, and return to core competencies to focus on what you do best.
AWS re:Invent Recap: 10 New Service and Update Announcements You Can’t Miss!
December 2nd, 2022
AWS re:Invent 2022 Recap
December 2nd, 2022
Highlights From Dr. Werner Vogels’ AWS re:Invent 2022 Keynote
December 2nd, 2022
Highlights from AWS re:Invent 2022: Global Partner Keynote with Ruba Borno
December 1st, 2022