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In the ever-evolving landscape of banking, efficiency is a crucial factor for success. To explore the path towards efficiency, Mambu and Microsoft recently joined a Finextra webinar titled: ‘Cloud-Native: How Can Banks Achieve Efficiency?’ In this article, we share some of the key takeaways with an edited transcript of the discussion.

During the event, industry experts: Ricardo Ribelles, Director Partnership Development, Mambu, Niall Archibald, Head of Financial Services Industry Strategy, Microsoft UK and Michal Gorski, Chief & Cloud Architect, Northmill Bank, shared their insights on the challenges and opportunities associated with cloud-native technology adoption in the banking sector. To watch the full webinar discussion, click here.

Q: What are the main challenges in the financial industry?

Niall Archibald, Microsoft: There are three macro challenges facing the financial sector: inflation, talent, and interest rate hikes have both positive and negative implications, such as increased margins but also higher costs of funds. Inflation leads to increased costs for firms and tests credit risk models. The industry also struggles with finding the right skills, especially in digital domains.

Q: How do large and small firms differ in their transformation conversations?

Michal Gorski, Northmill Bank: Coming from Northmill Bank, a neobank, in our case being efficient and cloud native is important to us. It’s not about transformation and fancy toys, it’s about using the tools from a cloud provider or any other SaaS company to achieve our business goals: not just build the software. Our focus is on the customers instead of building.

Ricardo Ribelles, Mambu: On top of the turbulent and uncertain macroeconomic environment banks are facing, whether they're larger banks, global banks and smaller ones, there's a natural tension for the need to keep up with innovation and address changing customer expectations in this tough environment.

Niall Archibald, Microsoft: Large firms tend to focus on scaling transformation, innovation, and regulatory aspects. They deal with complexities in large organisations. On the other hand, smaller firms aim for sustainable growth and expansion into new customer segments and geographies. They emphasise agility, unity of purpose, and the scaling of successful business models. They typically don't even question themselves as to whether their tech stack is cloud native.

By leveraging the right cloud strategies and tools, banks can successfully navigate the evolving banking landscape and meet the demands of the digital-first era.
Niall Archibald
Head of Financial Services Industry Strategy at Microsoft UK

Q: How does cloud adoption impact efficiency and competition for smaller banks?

Michal Gorski, Northmill Bank: For smaller banks and fintech newcomers, being cloud-native is a survival option. It enables them to operate with fewer resources compared to traditional incumbents. Cloud adoption helps these institutions compete with larger banks and corporations. Efficiency, time-to-market, and customer experience are crucial factors for them. They focus on using cloud tools and SaaS solutions to achieve business goals and prioritise market and customer needs.

Q: Has the shift towards cloud adoption been premature for some banks given many have been heavily driven by circumstances?

Ricardo Ribelles, Mambu: I wouldn't call it premature. I'd say it has been more reactive, to be honest. Many banks responded to market changes and customer demands, adapting to a new environment after COVID-19. However, some banks are now taking a more transformational and holistic view of cloud adoption. They are considering their operating models, talent needs, and technology in a more strategic manner. Addressing technical debt caused by legacy technology stacks is a key aspect that can be improved through a cloud-native, best-of-breed architecture.

Q: How do banks finance and fund cloud transformation projects?

Niall Archibald, Microsoft: There are a few points to make here. A well-architected cloud transformation program should provide a net positive business case. It can lead to efficiency dividends through the sunset of legacy applications, reduced maintenance costs, and opening of additional revenue streams.

Banks can also leverage the willingness to invest in their balance sheet when it comes to early stage costs of a long-term transformation project delivery cycle to get longer-term, mutually beneficial outcomes on both sides.

It is also really important to note the importance of maintaining investor and market confidence by demonstrating a commitment to ongoing investment and modernisation.

Addressing technical debt caused by legacy technology stacks is a key aspect that can be improved through a cloud-native, best-of-breed architecture.
Ricardo Ribelles
Director of Partnership Development

Q: How does cloud adoption impact talent and team composition?

Michal Gorski, Northmill Bank: In a cloud environment, developers and management need to think beyond their code and consider the entire cloud ecosystem. This requires knowledge of how different cloud components connect and the use of managed services and third-party SaaS solutions. It’s been challenging to build a multi-skilled product team that encompasses DevOps, code, business and strategies. Engaged individuals who enjoy working in such an environment are essential and can be difficult to find, but we’re committed to investing in R&D and upskilling our people to work on new services in the cloud.

Q: What are the benefits of investing in a clear and concise cloud strategy in terms of customer differentiation, value, and brand?

Ricardo Ribelles, Mambu: Organisations that successfully transition to a cloud-native approach can achieve several benefits. They can transform the time spent on managing technical debt into innovation, leading to significant cost savings, scalability, improved security and resilience, increased enterprise agility, productivity, and reduced time to market. These advantages enable organisations to adopt cloud strategies seriously, delivering value and making a difference in the market.

Q: Are banks now understanding the end-to-end potential of cloud for their business and striving to catch up with more agile firms?

Niall Archibald, Microsoft: Yes, cloud isn’t new by any means but it has fully permeated minds as a business growth lever with an increased understanding and vision of what cloud can do to support business growth. Banks now recognise the agility of cloud-native firms and the need to keep up with the competitive marketplace.

Additionally, emerging technologies like Generative AI and large language models, which can be easily integrated into products and customer interactions, are creating interest among business decision-makers. Business leaders want to understand how they would integrate this into their teams, products and customer interactions.

The value of a cloud architecture is becoming evident to both technology leaders and business leaders, and we’re now at a point of transformation and the industry context where the most defining elements of competitive success are really only available through SaaS or cloud services.

In summary, efficiency has become a paramount concern for banks seeking to navigate the dynamic landscape of the industry. The webinar shed light on the challenges and opportunities associated with adopting cloud-native technology with speakers highlighting the significance of addressing macroeconomic challenges, embracing innovation, and prioritising customer experience.

Cloud technology is undoubtedly a catalyst for efficiency. By leveraging the right cloud strategies and tools, banks can successfully navigate the evolving banking landscape and meet the demands of the digital-first era.

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Mambu Partnerships