Asia-Pac banks increasingly adopting cloud
IDC, with Infosys Finacle and IBM, has brought out a snapshot of the fastchanging landscape in cloud adoption in the Asia-Pacific region:
The Asia-Pacific region’s cloud spending is projected to post annualized double-digit growth through to 2024, according to a snapshot prepared by IDC in collaboration with Infosys Finacle and IBM. The study, titled ‘Definitive Guide for Banks to Build a Successful Business on Cloud’, outlines how the landscape is changing fast.
Discussing cloud for business agility, it says disruptive competition by digital natives, increasing disintermediation and changing customer expectations are fragmenting traditional bank value chains and driving banks to deploy cloud to stay ahead of hypercompetition. It projects the region’s digital transformation cloud spending between 2020 and 2024 to sustain a CAGR of 35% (compared to worldwide growth of 30%) to reach US$15 billion in 2024.
It says cloud is increasingly adopted as the default choice for both new applications and to improve legacy systems as banks reinvent their operating models. And 40% - 50% of the region’s financial institutions are looking to change their core banking systems in the next 3 years, with major considerations for cloud-native core banking solutions.
The study reveals that more than 70% of Asia-Pacific banks have deployed their digital commerce applications over the cloud with a focus on expanding their footprints in the digital economy.
USING ON THEIR OWN TERMS
Emphasizing that Asia-Pacific banks are taking on cloud on their terms, the study points out that >70% of large banks in the region have adopted enterprise private cloud (on-premises), >50% have moved their corporate deposit and lending systems largely to private cloud, and >50% have adopted a hybrid cloud environment. Their focus is on transforming legacy core banking systems through remediation and re-platforming to be platformcompliant and cloud-ready; and layering existing infrastructure to gain the ability to interconnect heterogenous systems and exchange data.
In the case of small and medium-sized banks, >58% run their consumer and small business loan origination primarily on public cloud and >60% of medium-sized banks are leveraging cloud to avail services that are designed for DevOps. The focus for mediumsized banks is on replacing select applications with a software-as-a-service (SaaS) equivalent and gradually relocating the application to the cloud environment to cope with exponential growth in digital transactions and improving regulatory compliance.
As regards small banks specifically, 80% prefer functional cloud vendors (marketing, sales or other support functions) to create vertically-oriented ‘sub clouds’ to better serve their specific requirements. It has been found that retail banks in this category have been quick to explore cloud and the priority is to reduce the cost of core banking, consolidate services and to rationalize distribution channels and access layers
DIGITAL NATIVE INSTITUTIONS
Stating that the region will see nearly 100 new digital-native financial institutions by 2025, the study says their focus areas will be effectively residing in cloud and leveraging a platform to expand on open banking offerings while building a sound ecosystem through collaborative partnerships.
The study discusses 3 banks which have banked on cloud to reap tangible and intangible rewards. Among them is the Indian bank, Shivalik Bank. It points out that technology modernization enabled the bank to innovate quickly and roll out new products and services on demand to meet the needs of the fast-changing marketplace.
Fo r e x a mple, I n f o s y s Fi n a c l e ’s integrated digital banking solution helped the bank to achieve a transformational leap in its technology base, delivering highquality customer service and providing highly personalized customer offerings. Leveraging SaaS to power its next phase of growth, it gained the agility it needed to cost effectively manage scale and power its growth with an on-demand portfolio of products and services. The bank also shifted its banking platform to an operational expense model, ensuring that it only pays for what it uses without significant upfront investments.
The other 2 banks cited in the report are Westpac and Australian Military Bank of Australia.
The study highlights that the use of cloud in banking boils down to the principle of choice for the best-fit environment for specific workloads and applications, and this will be based ultimately on what the business wants to achieve. Hybrid cloud strategies are driving interoperability, creating an open infrastructure that lets applications and data move freely across cloud platforms, it adds..