The financial services industry, a subset of the BFSI sector, is envisioned to go through a transformation in terms of cloud migration. To say that at the heart of this, modernization is a pressing need for core banking systems. These daily transaction-based systems are assumed to be the digital backbone of banks. Since transformation is the anticipation, these BFSI-focused systems are migrated from on-premise to the cloud. It is a strategic shift by the decision-maker that will progressively restructure the banking operations and drive investment-worthy value.
Bringing the change, the traditional banks are battling competition from fintech startups, neobanks, and big tech firms entering the financial space. The issue halting their progress is the legacy infrastructure, which poses a barrier to agility.
In such cases, Cloud migration services presented by the decade-long proficient BFSI cloud migration companies bring forth a data security-based method to modernize outdated systems. They also plan on reimagining banking for the digital transformation with your assistance.
Since the transition can drive change and welcome profitable outcomes, this bifurcation guide on how cloud migration services are transforming the core banking system will assist in understanding.
Why Legacy Core Banking Systems Are No Longer Sustainable
It is evident that banks are coming to encounter an expanding pressure to adjust to the digital transformation, where intelligent technologies are sweeping in. According to McKinsey, traditional banks that decided to adopt such modern technologies like AI, ML, Cloud, and IoT, witness a 20-25% increment in customer satisfaction. Prior to that, a 30% or greater restructuring has been highlighted in operational efficiency.
Yet many decision-makers are still finding reasons to stay in touch with the decades-old software. Such a lack of contemplation and future planning has resulted in zero sustainability solutions and leaves endpoints vulnerable. These are the reasons why core banking systems are facing challenges without cloud transformation services.
Inflexibility
Being an outdated software, the probability of scalability for a legacy system becomes close to negligible. These Legacy systems are not modular or API-friendly, which restricts integration with fintech platforms, mobile banking apps, and cloud-native services, leaving them a challenge.
High Total Cost of Ownership (TCO)
Investment in maintenance accounts for an overall cost. However, when the legacies are old and outdated, the maintenance cost can take up the majority of the investment and leave no room for scalability. Banks often allocate 60–80% of their IT budgets to maintaining outdated systems, with costs increasing as vendors for these old platforms become scarce.
Limited Innovation
Since the above example reflected how innovation becomes stagnant, it is safe to say that limitation is also seen. Product development cycles are slow and resource-intensive, reducing the bank’s ability to respond quickly to market trends or customer demands.
How Cloud Migration Services Transform Core Banking Systems
Considering we contemplated the challenges of legacy core banking systems, it becomes imperative to take a look at how cloud migration services are making a difference. Since these services bring in the concept of remote functioning, a scalable system, and investment world ROI, understanding these pointers in-depth becomes necessary.
Introducing Modular and API-Driven Architectures
Since the above challenges locate API inefficiencies as one issue, it is also seen that legacy core banking systems are monolithic and tightly coupled. However, when compared to the migrating aspects, cloud-native core systems are built using microservices, which allow different modules to function independently and scale individually with zero downtime and workflow issues. This means that banks can deploy updates to one service without affecting the entire system, thereby reducing downtime and improving agility with cloud migration services.
Real-Time Processing and 24/7 Availability
To bring another transformation change, it is evident to say that BFSI businesses are choosing cloud, considering that it enables real-time data processing and availability. Such a data-focused approach is crucial for today’s always-on digital banking environment. For instance, advanced features like instant payments, real-time fraud detection, and on-the-fly account analytics become more straightforward to implement. Moreover, cloud infrastructures are geographically distributed, ensuring disaster recovery and 99.99% uptime SLAs.
Augmented Scalability for Expanding Demands
Considering that customer bases are expanding and digital transactions are at a surge with the assistance of mobile apps and transaction solutions, cloud transformation services can auto-scale compute and storage resources. This elastic capacity ensures performance and resilience without overprovisioning infrastructure, but offers the space to make changes as per the needs. These cloud-native systems also assist in scaling new services like embedded finance, digital wallets, or Buy Now Pay Later (BNPL) offerings quickly.
Lower Operational Costs and Higher ROI
A move to the cloud banking system replaces capital-expenditure (CapEx) heavy data centers with operating-expenditure (OPEX) based subscription models. Considering that banks no longer have to invest in infrastructure for peak loads, but pay only for what they use, these cloud systems save up money for future changes and maintenance. Moreover, cloud observability tools provide banks and financial firms with valuable industry insights into resource usage, enabling them to optimize costs through automation and performance tuning.
Real-World Example of Cloud Transformation Services
Lloyds Banking Group undertook a multi-year digital transformation to migrate its legacy applications and core banking systems to Microsoft Azure with cloud migration services.
The initiative included migrating over 1,000 applications, augmenting digital onboarding, launching open banking APIs, and improving fraud prevention through the use of AI. Such transformation results in the enhancement of new products to the market in half the time. Not only that, the LBG noticed a reduction of 40% in terms of the infrastructure costs. Among the many, they augmented personalized features for the 26 million customers of their bank.
Conclusion
As we wind up, we are well aware of the fact that the cloud migration is no longer a tactical initiative but a strategic imperative for banks striving to rise up the ladder. Modernizing core banking systems through the cloud not only reduces money-focused issues and complexity but also brings forth the chances of innovation, resilience, and scalability. Banks that adopt this cloud-based transformation now will establish a future-ready foundation and accelerate digital expansion.
