IBM: Banks Are Struggling to Get Cloud Transformation Projects Off the Ground

Rebekah Carter

79% of banks are still in the initial stages of shifting to a hybrid cloud environment

IBM Insights
IBM: Banks Are Struggling to Get Cloud Transformation Projects Off the Ground

Recent research from IBM indicate banks are still struggling to bring their digital transformation initiatives to life. In the years since the financial crisis in 2008, major banks have consistently struggled with their profitability and performance metrics. Part of the reason for this is an inability to keep up with the trends of today’s financial consumers.

The struggles of old-fashioned banks have opened the doors for innovative companies in the fintech landscape to step in and start disrupting the space. While the share of current accounts for the “Big Four” banks in the UK have dropped from 68% to 64% since 2018, the percentage of accounts opened with digital disruptors has grown from 1% to 8% – according to a 2022 study from the Financial Conduct Authority

Customer preferences are shifting, and new generations are entering the landscape, searching for more convenient, digitally-enhanced banking experiences. IBM’s research shows if big banks want to improve their metrics, they need to be ready to innovate and adopt new digital platforms, designed to deliver exceptional user experiences.

Many Banks Are Still in the Early Stages of Transformation

Gartner has predicted around 30% of banks with more than $1 billion in assets will embrace new strategies like BaaS (Banking as a Service) by 2024. Yet, IBM’s study shows that many major financial institutions are lagging behind.

Conducted with the Banking Industry Architecture Network, it reveals an inability to digitally transform is one of the major factors holding traditional banks back from achieving their goals.

The analysis also shows that 79% of banks are still in the initial stages of shifting to a hybrid cloud environment. However, the most successful banks are those using technology to deliver:

  • Engaging partner ecosystems for efficiency and innovation
  • Data fabrics to allow data to flow through a broad network with ease
  • End-to-end digitalization to automate and streamline complex operational workflows
  • AI factories to transform data environments for actionable results
  • Small, operationally-focused teams responsible for critical tasks
  • Integrated early development process monitoring for obtaining data, and feedback

IBM notes banks capable of looking at business operations holistically are generally the most successful with not just digital transformation initiatives, but also in terms of financial performance.

Banks Need to Evolve to Survive

According to IBM, accessing a robust hybrid cloud strategy is critical for today’s banks. According to a recent study, 71% of financial services organisations thought it would be difficult to fully transform on a digital level without having the right cloud strategy in place.

IBM notes the impact of the cloud on the value of a business, when integrated with other transformative tools, is about 20 times greater than the economic results of using cloud as a standalone strategy. The most successful banks in IBM’s study were those capable of prioritizing collaboration and innovation across their enterprise boundaries, with access to the cloud.

Based on their findings, IBM suggests modern banks need to recognise the importance of technology in achieving operational efficiency, managing risk, maintaining competitive advantage, and increasing financial results.

In addition, banks must consider digitizing their business processes and practices with applications to run the company more efficiently, open up to external participation and innovation via engagement with their community, and modernize their technical infrastructure.

Of course, this is easier said than done. Yet, a phased cloud migration approach – often referred to as “digital decoupling” may provide the answer.

 

 


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