The IDC Financial Insights report, Banking Cloud Trends in Asia/Pacific in 2022: Cloud Becomes Truly Business-Critical, noted that the cloud has become a key part of the strategy of banks to attain and maintain a competitive advantage in digital financial services.
This is a big leap from many years of hesitating on the cloud, owing much to initial regulatory hurdles that banks had to overcome.
The research revealed that cloud budgets continue to grow, with 92% of the Asia/Pacific banks surveyed planning to increase their cloud spending in 2022 compared with 89% in 2020.
Inflection point
Asia/Pacific banks are at an inflection point for hybrid and multi-cloud environments. Around 93% expect to operate in hybrid and multi-cloud environments in 2023.
“Cloud is now seen as the underlying architecture for business applications, even those deemed mission-critical. The key imperative now is to prioritise which application-based workloads will give more business value once they are on the cloud,” says Michael Araneta, associate vice president for IDC Financial Insights.
IDC observed that horizontal technologies, which are applications not specific to financial services, appear to have priority over core banking systems when it comes to making their way to the cloud. The top five of these applications and business capabilities are finance applications, back-office, contact centre, enterprise resource planning, and email.
There are however applications specific to banking that are being moved to the cloud. The top five of these financial technology applications and business capabilities are consumer/SME mortgage origination, cybersecurity for banking apps, fraud detection and prevention, staffed channels, and digital service channels.
Source: IDC Financial Insights, 2022
Araneta declared that nothing is as mission-critical as core banking systems, with applications related to core banking also cited as being primed for the cloud.
He posited that the use of the cloud for core banking systems will come from two directions. One is from banks building digital banking brands that are standing up digital-native core systems. The other is from legacy banks modernising their legacy core banking systems through the abstraction of the business logic of key functions that are used to be part of a monolithic core (e.g., deposits, lending, payments).
“These applications are refactored into microservices and then on a piecemeal basis migrated to the cloud,” he concluded.
Not an if, but a when
For sure banks will eventually modernise their core applications because the people involved in building and managing legacy systems are retiring (if not retired already), as is the technology that was the foundation for many of these applications written in COBOL, NATURAL PL/I, Assembler and JCL and using databases like ADABAS, DB2, IMS and VSAM.
These core applications were written, and updated, over the decades to run at speed and do so reliably. To this day, many of our banking needs still depend on these legacy applications.
