Traditional banks are challenged on multiple fronts. They face intense competition from Fintech, which freed from legacy tech, have been embraced by younger consumers. At the same time, the regulatory burden for banks has never been greater. To meet the challenges, banks must become more agile and rethink operations. However, many are still constrained by legacy infrastructure, the top barrier to digital transformation in the financial services industry.
What’s the status of the Northern Europe banking sector?
Banks in the region are early adopters in general and have focused substantially on application modernization to improve the customer digital experience. At the same time, core modernization including cloud migrations are gaining speed to remain competitive.
Replacing legacy operations with cloud-based and open-banking solutions is a key feature of core modernization. The heavy investments will continue; Nordic banks are expected to spend over $1.7 billion on cloud services by 2024, according to a report by IDC.
Nearly 70 percent of banks are already realizing significant value from their cloud investments, according to our own Cognizant/Economist Impact Survey 2022. Those that succeed with the cloud benefit from operational efficiencies, cost reductions, AI enablement, superior employee experience and built-in automation capabilities.
Below, we outline two recent examples of Cognizant clients accelerating their digital journey.
Application modernization at European bank
A current example of successful application modernization comes from one of our banking clients. It’s a European subsidiary of an international banking company, providing retail and wholesale banking services as well as financial products such as insurance and asset management, that turned to us for revamping its front-end investments and private banking platforms. In an 18-month project, we helped them improve the digital experience with a user-friendly, personalized and seamless omnichannel solution with a high level of self-servicing. As a result, the bank increased its total client visits by approximately 100,000 per month and transactions by 13,000 per month.
Core modernization including Cloud migration: Moving from on-premise to cloud at Swedbank
Swedbank and its cloud-first journey, supported by Cognizant and Microsoft, is another example for digital transformation. The migration to cloud took less than 18 months and empowers Swedbank’s business to leverage advanced analytics through a platform that enables secure and fast delivery.
Steps for successful cloud migration
The road ahead might not be that straightforward to all banks though. To succeed, we advise companies to take the following steps:
- Prioritize what you know. Begin with a discovery phase to evaluate your existing application portfolio and prioritize cloud migration candidates. Do a deep dive into the portfolio from both a technical and business perspective, classifying applications based on where they are today and their projected role in the future.
- Think big, execute small. Identify quick wins for application modernization to foster buy-in and help circumvent change management issues. For example, applications developed in the last few years might be easily migrated using a simple lift-and-shift approach, showcasing early success.
- Don’t forget alignment. Banks have made significant advancements in modernizing their front-office, customer-facing systems applications and systems, but many struggle to align the front- and back-office systems. Investing in front-to-back modernization, aided by cloud migration and robotic process automation, can link customer-facing businesses with operations and back-end servicing to reduce inefficiencies.
- Engage the whole business. Only about 40 percent of executives report strong leadership support for modernization efforts. Working with all stakeholders – employees, customers, partners, and vendors – to prioritize and coordinate an application modernization strategy will lead to much better outcomes. Equally important is a robust governance and change management program to effectively manage stakeholder expectations and ensure the successful completion of modernization initiatives.
- Build skillsets for the future. Banks are caught between managing legacy tech and attracting, retaining and developing the talent to digitize operations. The most successful banks will look to build hybrid skills pods that combine business domain expertise, DevOps, data scientists, digital engineers, coders, and agents of change.