Since the 1990s, when European banking laws became more liberalised, competition among European banks has grown fiercely. The accelerating pace of digital disruption across the global banking landscape has also increased the pressure on banks in Europe. 

Today, traditional banks are flanked by social media giants, media darling fintechs and challenger banks. Touting expertise in personalised, customer-focused banking, these new highly digital entrants are keen to position themselves as a better alternative to traditional banks. 

Many banks across Europe, however, are lagging behind, running on old legacy systems. Updating them can be complex, time-consuming and costly. There’s also a human challenge to the situation.

Many banks’ engineers with expertise on the outdated technology are approaching the age of retirement, with no one to take their place. 

With this technical storm brewing, what can help longstanding banks digitise further and get ahead of the competition?

The answer is simple: the cloud. It is imperative for banks to go cloud-native in order to keep evolving at speed. And I don’t mean just for non-critical systems, such as email or CRM, I mean using the cloud for core activities, including anti-fraud, data hosting and payments processing. This is the only way banks can deliver a best-in-market customer offering.

The success of banking’s technology revolution depends on increasing intimacy with customers. Modern technologies, such as AI and machine learning, must be the key driver for strategic thinking and investment at banks, enabling them to create a connected ecosystem that provides dynamic solutions to customers. These technologies thrive at their best within a cloud-native context. 

Being cloud-native is about the way a bank’s software is constructed. Effectively, it combines the openness and agility of an API-first system with the security of walls between different operations, all on a central application. For instance, dividing development, testing and production and continuing to break down into smaller and smaller components. By operating on a single codebase and single application, a cloud-native system offers increased agility, speed and scalability. Meanwhile, the containerisation allows developers to edit only relevant parts of code, rather than take down an entire IT service. In short, cloud-native technology allows you to code in the morning and deploy in the afternoon.

This enables banks to deliver real-time, high-quality and truly personalised services to their customers. It also significantly reduces operational costs. 

Now even regulators are opening their doors to the cloud. European regulators — from the FCA to the European Banking Authority — have published guidelines regarding cloud technology, increasing confidence in the cloud among security-conscious C-suite executives and boosting adoption of the cloud by banks. 

The potential benefits from investment in modern technology are enormous. Our recent research report shows that by embarking on an end-to-end digital transformation, banks can potentially unlock a trillion-dollar profit opportunity. Digital disruption doesn’t have to hit your bank like a tsunami — with the right technology in place, you may just find yourself living on cloud nine.