While, in general, banks are embracing the cloud on a broad scale, some financial institutions (FIs) are merely following the crowd to not get left behind in the modernization push, said Zohair Gangjee, business strategy lead, global financial service practice at Red Hat.

“What COVID has done is lent a boost to the digitization and automation efforts of banks,” he told Karen Webster. “But also, what we’re beginning to see is it’s creating further segregation between the leaders in the industry and the laggards.”

As that segregation becomes more evident, it’s important to understand why some FIs continue to hesitate and struggle with cloud adoption. Only then can the laggards catch up and build upon the digitization momentum of today well into the future, said Gangjee.

Making A Lifestyle Change

For many of those laggards, the motivation behind migrating to the cloud can often be attributed to “FOMO” — that is, the fear of missing out. But this isn’t enough for these FIs to realize the benefits of modernization, warned Gangjee.

“The true value really lies in those new ways of working,” he said. “Because if all you’re doing is supporting your old processes when you’re moving things to the cloud, you’re probably missing out on the true benefit.”

Even with the market pressure to digitize amid the pandemic, these banks that migrate to the cloud for the sake of following the crowd are likely to continue to struggle through industry evolution. Gangjee emphasized that cloud adoption must be about more than embracing software; it involves an entire “lifestyle change,” he said, as to how FIs operate.

A part of that shift is an elevated role of internal developers. In the past, these professionals have been held back by technical support tickets and an inefficient chain of command to improve functionality. Today, thanks to the cloud, product and technology teams can become far nimbler — and as a result, said Gangjee, they should become an integral part of banks’ overall modernization efforts.

“It’s incredibly important to begin to foster an open culture where the best ideas are debated within the organization, and for the best ideas to win,” he noted. “It’s incredibly important to have service designers, product owners and developers to be allowed to influence the course of a bank.”

Taking A Progressive Approach

While the pandemic has undoubtedly accelerated the digitization push in the financial service arena, achieving the full value of cloud migration won’t occur overnight. That’s especially true as recovery efforts get underway, and the burden of supporting the economy shifts from governments back to banks.

As a result, Gangjee said FIs’ credit management and lending strategies will be a particularly important part of digitization.

“Banks are going to have to look at the sectors that they’re lending to with quite a fine-tooth comb because the inevitable reality is that not all sectors are going to do that well over the next year or two,” he explained.

As FIs look out over the next few years, they’re also going to have to reexamine the progress they’ve already made in their cloud migration journeys, which often occurred in haste in recent months. It’s an opportunity for banks to go from “duct-taped” systems and inconsistent cloud adoption to a holistic ecosystem of cloud-based infrastructure that can support economic recovery and keep pace with customers’ shifting demands, he said. With regulators embracing market innovation, banks are more empowered than ever to take the necessary steps toward digitization.

But it’s not going to happen overnight. Incremental progress is key, said Gangjee, as is remembering that cloud migration isn’t simply about technological adoption, it’s about an overhaul in the way banks do business.

“That applies to any financial institution, regardless of its size and scale,” he said. “It’s that incremental factor that is really aided by new technologies, applications and paradigms … If you take a deep breath, moving to the cloud is really a change in how you deliver value. For banks, it’s thinking about the ways they’ve worked in the past, and new ways of working in the future.”