Digital bank

Change is finally upon us as the world’s largest banks reorganize their aging wealth infrastructure and choose a distributed, cloud-based future.

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For years, cloud-native core banking has been the buzzword at many tech conferences.

The promise that incumbent banks and financial institutions would soon be forced to overhaul their creaky legacy infrastructure, shutting down a tangle of on-premises and hosted servers.

Finally, they would join the rest of the mainstream Internet and adopt a distributed infrastructure, all running on AWS or Azure.

Now, finally, the promise is turning into reality.

Last week, JP Morgan revealed that its entire U.S. Chase retail banking network will be moving to a cloud-native core banking platform built by Thought Machine.

Meanwhile, 10x Banking Technologies in June raised $ 187 million from funders (and clients) including Nationwide and Westpac, and Mambu landed a round of € 110 million in January.

And a long list of other cloud banking providers, from nCino to Yobota and Modularbank, all have varying successes.

But why now?

In truth, a set of factors have accumulated over the decades, now putting enormous pressure on banks to adapt.

Covid is obviously the last factor, inflating demand for digital banking services and for more nimble banks that embrace the latest technologies.

He has been joined by a new generation of CEOs over the past few years at several major UK banks, all keen to demonstrate change without repeating the mistakes of the past.

Then there is the sustained low interest rate environment in which banks have operated since 2008, causing interest income on loans to decline for much longer than anyone could have imagined. This created difficult cost-income ratios, which were further highlighted by the arrival of neobanks offering current accounts while operating them at much lower costs.

Finally, there’s the aforementioned creaky legacy infrastructure, combined with a new industry understanding that banks are not tech companies, and maintaining a fortress-style mindset to control their entire tech stack. isn’t really what bankers should be spending their time on.

These factors, and others, combine to create a wave of real interest and real investment in cloud banking. And not a minute too early.

The AltFi Leader is a new weekly view for 2021 from our editorial team. We would love to hear your ideas, thoughts, comments and constructive criticism: é[email protected]

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