As a result of strides in technology, various industries around the world have transitioned to digital operations, some partially and others completely. Many companies have shifted their services to virtual platforms while trusting software solutions to secure their data in the cloud, but the banking industry appears to be holding back.
The dependence on legacy applications and fear of risk-taking have prevented many banks from adopting more efficient digital applications, particularly cloud services. While some of these are valid concerns, what they really need is a core bank solution that can effectively mitigate these potential issues throughout the process.
Once the bank has found the right solution for them, they can follow a straightforward process towards migrating to the cloud.
The best way to start any huge developments is to plan ahead, and this means setting a timeline and expectations for how this will all go. An issue that tends to plague banks is the idea of one big push to transform the whole bank, so to speak. Not only does this fail almost every time, but it wastes large investments put into hasty production.
On the other hand, it is not productive to keep an open-ended timeline either. Advancing one’s digitalization efforts by gradual increments with no end in sight could keep a bank lagging behind the rest who have already successfully implemented current-gen banking technologies. Either way, the bank must have a clear vision of its development and the time necessary to realize it.
Basic Preparations Before Proceeding
Perhaps the biggest difficulty for banks to transition into the cloud is that some of their legacy utilities cannot be changed so easily without severely compromising the entire bank’s operations. Usually, this has to do with maintaining all the financial and personal data from users, clients, and partner corporations.
These legacy applications cannot be decommissioned because doing so withholds banking services from clients. At the same time, legacy systems must be used until system upgrades are fully online. This kind of chicken-and-egg dilemma prevents banks from fully embracing digital transformation.
In essence, the solution is for banks to first upgrade bank databases and operating systems, browsers, and other core banking software. The bank’s servers should also be upgraded as well to ensure the proper functioning of all applications during the transition process. Ancillary services can be upgraded at a later stage.
Building Cloud Applications in a Safe Environment
At this point, the components necessary for the cloud system have arrived, and the bank must begin developing their cloud-based applications based on what they currently have and what they need. It would be far too hasty and irresponsible to have these in-development applications already active for core banking operations, so it is best first to create a safe, virtual environment for testing.
Within this environment, the applications can be built and tested thoroughly until they are up to the necessary specifications and functioning. Then, they can be run through mock simulations of real-world banking situations, especially for cases that the bank feels are their pain points. It is a good idea to have a recovery center as well that can host these applications during this phase.
Once these programs are in order and ready for actual operation, it is time to start building the databases for these into the official cloud system that the bank will be using moving forward. Unlike in the non-production environment, data produced by the applications here will be sent into the cloud for whole bank access.
Migrating from On-Premises to Online
Finally, the cloud system and all of the applications necessary are ready for the bank to move everything online. What makes this difficult is having to go through the physical, on-premises documents and utilities for manual transfer. This will likely take the most time out of the entire process, so it is up to the bank’s management on how they wish to proceed.
On one hand, the bank may opt to do it by function, so they could start with parts of their operations that have the least risk to the whole. Starting here would reduce the odds of jeopardizing the whole bank so that once they are done migrating the more critical functions of the bank, they would have had prior experience with doing so. This should help avoid any errors while maximizing efficiency.
On the other hand, the bank may group utilities by services and categories, namely, customers, credit, cash management, deposits, liquidity, loans, payments, trade finance, and treasury. Of course, these services may vary per bank, but they may order the transitioning of these components by priority, especially in such a way that addresses their vulnerabilities first.
Maintaining the New System
Once the whole bank’s operations have been transferred to the cloud, they can now focus on digital developments. This means creating an application programming interface for potential innovations in digital banking as well as a user-friendly interface that will eventually be accessible to employees, clients, and any end-users.
The bank will also have to set up sustainable protocols for monitoring the entire system for any errors and digital vulnerabilities moving forward. This task includes logging data on the bank’s performance internally and externally, especially in comparison to how they were doing with the legacy applications before.
This whole process of migrating to the cloud may indeed seem very complicated, but the time and resources spent on this are meant to future-proof the bank, especially with the rest of the world also transitioning to a purely digital era. Furthermore, digital banking opens up a wide scope of opportunities for innovations to set any bank apart in services.
About the Author
Monica Mendoza is a writer by profession who has written extensively on the subjects of Finance and Technology. Her work has been published across many respected, and well-known websites and publications. In her free time, she enjoys hiking, surfing, and traveling across the contiguous US states. She dreams of retiring in Montpellier in France someday.