Deep Dive: Why The Pandemic Is Pushing Banks To Go Cloud-Native

Digital banking adoption has steadily expanded during the pandemic and legacy banks have consequently struggled to offer seamless services. The financial institutions (FIs) that have clung to their outdated infrastructures have pumped additional funding into them over the years to shore up weaknesses, but many are now dealing with lagging servers and frustrated customers as the health crisis pushes more services online. Recent research also suggests that these digital shifts could be permanent as approximately 30 percent of individuals in one report stated that they would continue using online banking channels after the pandemic passed. This means FIs clinging to aging infrastructures could continue to face challenges unless they quickly adapt to the digital migration.

Cloud technologies are emerging as one potential solution. Most banks and financial services companies are familiar with the cloud and its benefits: 85 percent of the organizations surveyed in one study stated that they ran their processes on multicloud solutions. Businesses have been intrigued by cloud-based services’ speed and data management capabilities for several years, as their rising investment rates in related technologies reveal. Many have nevertheless harnessed cloud technologies only for select processes, even though such solutions could make them far more agile by augmenting or even replacing their core banking systems.

However, many legacy banks are now contemplating more substantial digital upgrades as the COVID-19 pandemic continues to strain their existing infrastructures. The following Deep Dive examines what legacy FIs can gain from going cloud native as well as how technologies such as containers and Kubernetes can add the flexibility and transparency their outdated systems lack.

Cloud Migration And Strategy Changes

Consumers’ digital shifts at the onset of the pandemic were born out of necessity, and banks and other financial entities scrambled to offer services that helped them avoid potentially risky in-person transactions and exchanges. The crisis’s impact on digital banking was different than previous trends, however, as it also forced older consumers who generally eschewed these channels to transact online. This behavior has continued in recent months, and one study found that 85 percent of seniors are now using digital banking tools more often.

The need to keep pace with this growth is leading FIs to move their legacy systems to the cloud, especially as the ongoing health crisis changes the ways banks communicate with their employees and customers. This online shift has prompted FIs to reconsider how they conduct even basic tasks, like answering consumer queries, and they are also evaluating how the cloud could remove the digital stumbling blocks that prove especially frustrating to new users.

However, FIs will need to fundamentally shift how they understand and utilize cloud technologies to fully realize their potential. Banks must think of the cloud not as a tool but as a system, which means they need to consider how it can be shaped to support multiple applications. One study found that 93 percent of companies had multicloud strategies, for example, but only 33 percent of the enterprises surveyed were using multicloud management solutions. This essentially means that cloud platforms are familiar to banks, yet FIs are unfamiliar with connecting the many disparate cloud solutions they use. It is here that the use of cloud-native systems and accompanying tools, such as Kubernetes, come into deeper play.

The Cloud-Native Age And The Rise Of Kubernetes

FIs that are considering ditching their legacy systems must ensure that they invest in replacement solutions that grant them flexibility and agility. This could be achieved by migrating to a cloud-native system, meaning the FI would no longer utilize outdated mainframes to support or hold any data. Tools such as Kubernetes could, therefore, play a crucial role in the financial industry’s future, as it allows banks and other entities to more readily manage, scale and deploy applications they are running in the cloud.

This ultimately creates more seamless experiences for consumers, while reducing costs for FIs. One study found that containers and Kubernetes can cut computing costs by as much as 50 percent. Using these technologies can also make deploying innovative features and software changes — such as code shifts to support increasing digital banking volumes — much faster. Another report found that 53 percent of enterprises that have adopted Kubernetes cited this condensed development cycle as a top benefit.

Adopting this technology requires that FIs become familiar with cloud-native systems and their benefits — and they must also turn this familiarity into action. This can be difficult for banks that are focusing most of their attention on maintaining legacy infrastructures during the pandemic. FIs turning to cloud-native systems will, therefore, be likelier to satisfy their digitally-minded customers — and maintain their satisfaction — during and after the health crisis.