If you were looking for a poster child for the need for radical transformation, it would be hard to find a better choice than the banking sector. In banking, business models are changing rapidly. Regulation and compliance pressures are mounting. New competitors, like fintechs, are emerging around every corner.
This dynamic landscape requires a new approach to deploying digital capabilities and using information more effectively.
David Zeller, chief technology officer of the Austrian banking group Raiffeisen Bank International AG (RBI), sees cloud modernization as an integral element in being able to satisfy customer expectations, battle new competitors, be more cost efficient, and all while providing more transparency and trust.
Importantly, Zeller doesn’t view digital capabilities as something to bolt onto the traditional banking model. Instead, he says cloud modernization enhances the organization’s “foundational pillars” and strengthens its relationship with its employees and over 18 million customers in numerous ways.
“From an IT perspective, the cloud has an important role in improving our data ecosystem, our software engineering, our security and compliance, and our cost optimization,” he says. “The cloud gives us the flexibility to gain access to modern technology. We know the cloud is the way forward for us.”
Cutting the Grocery Store Queue
RBI, which operates 13 subsidiary banks in Central and Eastern Europe, had no applications running in the cloud just four years ago. As the need for cloud modernization became apparent, RBI built 60 applications in the cloud in two years. When the pandemic struck, those efforts ramped on. Today, RBI has 150 applications in the cloud. The banking group plans to add 400 more cloud-based applications over the next 24 months.
As with most industries, the pandemic increased the need for flexibility and agility in banking, while revealing new opportunities. Raffeisen Albania, one of RBI network banks, determined that customers were uncomfortable queuing up in supermarkets. The bank created a mobile application that allows customers to scan products and pay for them immediately without lining up. “We could have done this earlier, but covid-19 sped everything up,” Zeller says.
Critically, the cloud modernization allowed the application to be easily integrated with retailers’ systems. Cloud capabilities also enabled the app to be delivered in only eight weeks. “Without the cloud, we wouldn’t have had the flexibility to bring the application up in such a short period of time,” Zeller says. “With IT supply chains crippled, we couldn’t build on-premises infrastructure that fast.”
“We can’t take weeks to grant a loan or credit anymore,” Zeller says. “The business side is requesting greater speed from us, because customers expect greater speed.”
Improving Core Functions
Cloud modernization, leveraging open APIs, gives RBI greater capabilities in data analytics and machine learning. A key part of this equation is handling larger amounts of data in real-time. Even if the customer-facing aspect of an application doesn’t change, the ability of the cloud to collect and analyze data rapidly can enable the app to run faster or provide information quicker to RBI’s risk department.
As a result, RBI can manage risk better and calculate risk more rapidly because more accurate information is available faster. RBI can therefore take on more risk safely, providing a better customer experience.
“For this reason, we don’t see the cloud as only needed for the retail side of the business, where we deliver a couple of fancy websites and fancy applications and feel satisfied about our modernization,” Zeller says. “Cloud modernization is also critical for our core functions and provides the necessary foundation to provide better service to our customers.”
RBI partnered with Hitachi Vantara because of its proven experience scaling modernization initiatives. “Our IT department cannot stop running the bank to do a cloud modernization,” Zeller says. “We have to maintain our ongoing functions while doing the cloud modernization with the same amount of resources. Every on-premises system looks different, but the target is standardized, so we needed a partner who could help us rather than do everything on our own.”
Allowing IT to Innovate
For RBI, the cloud is the underlying infrastructure for implementing a dev-ops model, which is a set of practices that combines software development and IT operations to shorten the systems development life cycle and provide continuous delivery with high software quality.
By eliminating the need for a large central IT department to manage servers and services, the development teams and business teams were able to move closer together. IT teams have shifted their focus from operational efforts to innovation and rolling out new features more quickly.
Hitachi Vantara has also helped prepare RBIs team to be technically ready for the modernization. “It’s not enough to just have an application in the cloud,” Zeller says. “We need to make sure our people are capable of using the technology, so they can operate differently, more efficiently, and with more innovation. This truly is about transformation, not just about moving an application from point A to point B.”
The agility and flexibility the cloud modernization brought will be part of RBI’s next normal. “One of our board members said it quite succinctly: ‘This is the new baseline,’” Zeller explains. “Our business partners, our competitors, and our entire ecosystem have learned how to think differently, so we cannot go back to the way things were before.”
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