Here’s How Banks Can Migrate To The Cloud & Efficiently Manage Risk

by | Nov 12, 2021

As a leading banking institution migrating to the cloud will arrive with a host of benefits for you to enjoy. Right from a lower cost of operation to automation of manual tasks and higher safety and security to streamlined workflows, the benefits are limitless.

However, as the recent Accenture Cloud Readiness Report indicated, more than 94% of banking institutions intend to migrate to the cloud; but, one common restraint they single-handedly suffer from is the lack of effective measures to mitigate and manage the risks involved in the migration.

Thus, in today’s blog post, we will share with you a detailed analysis of the risks migrating to a cloud banking architecture entails and also methodologies you can adopt to efficiently manage and mitigate these risks.

Without further ado, let’s get started.

Table of Contents

  1. Risks of Migrating to the Cloud
  2. Steps to Mitigate These Risks
  3. Digital Decoupling
  4. Core to Cloud
  5. In Conclusion
  6. The Reference Shelf

Risks of Migrating to the Cloud

Before we begin to understand the various methodologies you can adopt to effectively manage your risks, it is crucial to first aptly recognize them.

Over the years, banks around the globe have developed legacy data systems at their offline locations and further spent billions of dollars to fine-tune them as per their exact needs.

Source : Pinterest

Customers have also come to expect these services to be omni-operational, and any failure manifests into headline news. Since these systems are physically located at the bank’s premises, it is equally important to ensure their safety and constant maintenance, for which institutions often engage round the clock technical support teams.

However, one of the most significant risks of migrating their entire legacy architecture onto the cloud is either a complete system failure or partial failure of crucial operations such as debit and credit transactions, ATM withdrawals, net banking etc.

Along with this, there is also the added risk of data loss and link failure, meaning consumers might either lose all their data stored in the bank database or lose access to them momentarily.

Steps to Mitigate These Risks

Now that you are familiar with the true extent of the risks involved in migrating legacy banking architectures to the cloud, the next step is to understand the various methodologies you can adopt to effectively mitigate these risks.

From our experience in helping clients migrate to the cloud and that of other organizations such as Accenture & TCS, we have come to realize that the most effective methodology to efficiently mitigate the involved risks is to adopt a phased approach.

Rather than abruptly shifting the entire architecture online at once, adopting a planned approach in which processes are categorized by priority and migrated one after another will be better suited.

Essentially, the entire phased approach can be subcategorized into two steps, with additional categories within them.

Digital Decoupling

The first step of the process is to undertake a digital decoupling exercise. This essentially involves isolating the pre-existing legacy core system from the novel cloud architecture and only realizing the prowess of the legacy system in the cloud by leveraging APIs.

For instance, banks can categorize and offer specific customer offerings in a native cloud environment, such as paperless account opening.

Embarking on a digital decoupling exercise will not only help the institution mitigate the risk but also provide ample opportunity to test and retest the native cloud architecture before initiating a full migration.

Core to Cloud

Once the digital decoupling exercise is complete, the next step of the process is to individually migrate specific operations from the core legacy architecture to the native cloud environment.

Albeit a long and time-consuming endeavour, following a layered methodology will ensure that each of your service offerings are properly and appropriately migrated to the cloud, tested and finally approved for operation.

Along with this, a layered approach will also allow you the luxury of deciding which offerings to simply shift from legacy to cloud, which offerings require the design of a cloud-native model and lastly, which services can be operated by leveraging a SaaS (Software as a Service) model.

Source : UpLabs

The beauty of following a phased approach, as outlined earlier, along with its two subcategories, is the luxury of leveraging both low risk and optionality.

With this approach, banks essentially have the option of migrating to a native cloud architecture while enjoying ample time and resources to test their methodologies and processes before finally embarking on a full launch.

For instance, balance check via SMS can steadily be migrated to the cloud and transitioned into a WhatsApp notification by leveraging open APIs and a read-only database.

Additionally, banks can make an active choice to retain core databases and processes onto the legacy system in an effort to maintain a record for the long term. The choices are essentially limitless, as there is no one right or wrong answer.

In Conclusion

As the world transitions into a cloud-first approach, the need of the hour is to migrate your legacy systems to the cloud. However, the same needs to be executed with stability and efficiency and in our opinion, a phased and layered approach is best suited to mitigate the involved risks.

Thank you for reading, and I will see you in the next one.

The Reference Shelf

  1. How banks can migrate to cloud and manage risk [Link]
  2. Fast forward: How cloud computing could transform risk management [Link]
  3. How can banks stay ahead of the curve? [Link]
  4. How Banks Can Move to the Cloud Securely [Link]
  5. What is stopping banks from transitioning to the cloud? [Link]