By Mrutyunjay Mahapatra
The Indian banking, financial services and insurance (BFSI) sector is witnessing a long-pending season of change with emerging technologies causing disruption in operations and customer experience. Adopting cutting-edge technology to build operational resilience has become a necessity rather than a choice for banks. This is especially true for small and cooperative banks facing competition with fintech companies and struggling with faster transformation cycles, go-to-market strategies, and the ordinary consumer experience. A digital transformation for these banks is crucial to remain competitive, build resilience, and enhance the customer experience.
Critical emerging technologies are driving the digital transformation journey of this sector, with cloud computing leading from the front. Cloud-enabled services are transforming India’s financial sector, enabling banks and fintech firms to deliver innovative solutions with ease, agility, and efficiency.
Why embrace cloud migration?
Cloud-enabled services empower banks to scale up business by redefining products, processes, technology infrastructure, and governance models. It helps them to scale up services by providing a range of benefits such as storage, computation prowess, operating across diverse applications, and contextualised offerings based on the requirements of the entity opting for cloud services. The integrated artificial intelligence/machine learning capabilities enable running advanced analytics and gather insights on large data sets that are traditionally kept in silos. The cloud transformation journey encompasses technological upgrades, process automation, organisational restructuring, and product innovation, which ultimately help in reducing business risks and driving operational efficiencies.
Given that the financial sector handles critical forms of data, the cybersecurity aspects and concerns about control over data also assume significant importance. The relationship between cloud service providers (CSPs) and financial entities is built on the principle of shared responsibility, where entities are responsible for security in the cloud, controlling and managing the security of their content, applications, systems, and networks. On the other hand, CSPs manage the security of the cloud to protect its infrastructure and services, maintain its operational performance, and meet relevant legal and regulatory requirements.
Migrating to the cloud
Migrating to the cloud entails the relocation of applications, data, infrastructure, security, and other objects to a cloud computing environment, often from a company’s own location. In such a venture, the company decides to move its operations to the cloud to boost efficiency in scaling up services and operationalising new products, reduce security risks and, in most circumstances, lower operational costs. Migration is a journey that companies undertake, moving from simple tasks to gradually complex operations as per their requirements and vision.
Companies must also make strategic choices between deployment models such as public, private, hybrid, and multi-cloud architectures and decide between different migration strategies based on the entities’ contextual needs and aims. For instance, companies that wish to utilise the benefits of the cloud for their new solutions but prefer the stability of their legacy operations may opt for a partial migration strategy where only a select portion of services are migrated onto the cloud. Alternatively, other strategies, such as parallel and big-bang migration, involve gradual transition and moving entire infrastructures respectively. Ultimately, the decision on how to adopt and utilise the cloud rests entirely with the entities concerned.
Catalysing adoption of cloud-based financial services
Governments and banking regulators have acknowledged the benefits of cloud services. This has boosted the adoption of these innovative operational models across the BFSI sector and is projected to be mainstreamed in due course. The MeghRaj programme aimed to host government applications on the cloud. At the same time, the EASE (Enhanced Access and Service Excellence) reforms incentivised banks to integrate emerging technologies like cloud, thereby establishing the potential of the technology as a tool to revolutionise the domestic BFSI sector.
Indian banks such as Axis Bank, RBL Bank, AU Small Finance Bank, and others have already utilised the cloud to improve their services, retain and onboard new customers, and scale up new services such as digital lending according to demand. Some, like Axis Bank, were also able to reduce customer onboard time to below eight minutes, reducing friction between the service provider and customer effectively by utilising the agility that the cloud enables. Internationally, cloud-based financial services have brought about a sea of efficiencies in the case of Standard Chartered Bank and embodied stability in times of crisis for customers of PrivatBank of Ukraine, where services were migrated to the cloud within two months even as the war threatened the reliability of local infrastructure. PayU is another example where a company was able to ease information technology management and compliance through cloud adoption. These case studies establish the efficiency cloud solutions can enable for financial institutions, underlining the benefits of a potential transition at scale domestically and globally.
As digital transformation accelerates in financial services, cloud computing emerges as a potent enabler for resilience and future-readiness. With conducive policies, regulatory support, and a growing trust in the technology, cloud-based financial services can catalyse broad adoption, empowering Indian financial institutions to optimise efficiency and elevate customer services. While challenges remain, they will diminish over time as cloud technologies mature and become mainstream across the BFSI sector.
The author is a Member, board of directors, and chairman of audit committee, Reserve Bank Innovation Hub; and former MD & CEO, Syndicate Bank
Views are personal