The Migration from Legacy IT Systems to the Cloud
John Spencer, Chief Product Officer at Veridium comments on the challenges financial institutions are facing with legacy IT infrastructure and the benefits of migrating to the cloud through services such as AWS.
Traditional companies are struggling to keep up
Today’s digital landscape frequently imposes new demands on financial institutions, with innovative technologies and new regulations such as PSD2 disrupting established processes. As physical banks and cash machines continue to disappear from our high streets, there is a growing shift towards customers using their mobile phones to conduct their banking activity. In fact, over two-thirds of British adults now use online banking, putting great pressure on traditional banks that are burdened with legacy IT systems. As 46% of bankers perceive this infrastructure to be the biggest barrier to the growth of commercial banks, the need to update the network is more urgent than ever before.
The challenger banks of today, born on the cloud, automatically inherit cost, performance, and efficiency benefits that traditional banks simply do not have. Without having to embrace the initial digital change, this new generation of mobile banks can be more nimble, hoisting technologies to personalise their services, and do so at a much lower cost. Legacy systems have proved reliable in the past, but in order to maintain momentum in the digital age, and compete with innovative businesses, financial institutions should push forward with rapid investment in cloud services.
The need to migrate to the cloud
Massive growth in data usage has made it increasingly difficult for organisations to store all their intelligence on in-house servers. Today’s financially-literate customers should not expect to have their personal information kept in physical computer systems. Instead, they expect instant access to their personal data anytime, anywhere, and in the most secure manner.
While some financial institutions are exploring cloud-based solutions, many remain hesitant in undertaking a full-scale migration. With such a complex transformation to undertake and outdated architecture to contend with, companies are encountering certain obstacles. Time and cost pressures, in particular, are leading to some firms to ‘cut corners’ when it comes to upgrading their infrastructure, causing severe disruption to customers. From October 2018 to October 2019, the UK’s Financial Conduct Authority (FCA) reported that major banks suffered 265 IT shutdowns, which prevented customers from making payments.
The financial services sector has also been shaken by a new wave of regulations aiming to better protect both customers and businesses. Since the General Data Protection Regulation (GDPR) has come into force, European Union citizens have been granted more control over their personal data. This means that organisations collecting data are obliged to do so legally and to protect it from misuse.
Legacy systems have proved reliable in the past, but in order to maintain momentum in the digital age, and compete with innovative businesses, financial institutions should push forward with rapid investment in cloud services.
Furthermore, with Payment Services Directive 2 (PSD2) fast-approaching, companies are obliged to implement Strong Customer Authentication (SCA) to mitigate the risk of payment fraud. A huge number of fraud cases – nearly 340,000cases – were reported in 2018, calling for a double layer of authorisation to make financial transactions over £28 more secure. It has therefore never been more important for institutions to properly execute a full-scale migration to the cloud to benefit from its innovative services, including biometrics.
Benefits of migration
The AWS marketplace, and similar service providers, offer an online platform through which customers can unlock a plethora of cloud and other digital applications. Making the transition via these networks, where the cloud is effectively brought to you, renders the process far more simple and frictionless.
Through AWS, financial firms can easily integrate the necessary biometric authentication platforms. Designed to verify the identification of employees and customers using multi-factor authentication, companies become far less susceptible to cyberattacks and data breaches. By adopting digital identification technologies, institutions can achieve regulatory compliance and offer a safer customer experience. It is not too late for traditional firms to transform themselves and compete.
The greater computing power of cloud-based software brings a host of other benefits to organisations and customers. Having data centralised through the cloud avoids the latency issues that come from having computing tasks handled from afar, and permits the on-demand availability of resources. This allows a more seamless digital experience to be created, to meet the evolving needs of customers. Simultaneously, businesses can gain cost and time efficiencies that translate into more effective workload management, increased flexibility and ultimately productivity.
If financial companies are to avoid falling behind today’s challenger banks, they must discontinue the use of legacy IT infrastructure, and fast. By utilising the resources that services such as the AWS marketplace have to offer, companies can efficiently embed the cloud into their operations, and deliver the best online experience expected of today’s educated customers. The migration will only ensure secure account entry using the latest biometrics, it will also achieve cost and time efficiencies that could well turn around profit margins.