Although we’ve seen increased appetite from banks globally to accelerate the pace of digital transformation over the last two years, many players have focused solely on updating customer-facing systems at the front-end and have put off the more complex need to update their core infrastructure. As a result, many established banks remain encumbered by legacy mid- and back-office banking systems and this is often holding back the pace of change. Digital challengers and other new market entrants, on the other hand, haven’t had the same constraints to overcome and have been able to take a ‘digital-first’ approach from the outset.

But recent research from Accenture revealed that 4 out of 5 banks surveyed are now either planning to or are already migrating their core business functions from mainframe systems to the cloud, and many are doing so quickly. Increasingly they are recognising the benefits of cloud in terms of the cost savings it can provide and the potential it gives them to innovate much more quickly.

Don’t be left behind

A SaaS-based model allows new digital capability to be rolled out faster, with everything deployed and managed remotely. This is often in stark contrast to the lengthy deployment and upgrade timeframes associated with traditional software implementation on premises.

To illustrate the point – think about the scale of the work involved in making hard-coded changes to monolithic on-premises software – for example: to accommodate SWIFT’s changes to Trade Finance messages last November, or the upcoming ISO 20022 standards for Payments due this year.  Consider how much simpler things would be if this could all be handled through packaged software that is continuously updated and available on a SaaS basis.

A SaaS-based model can help banks migrate from manual processes and software updates on premises, to a fully digitised approach – with the vendor taking full responsibility for maintenance and software updates. Removing this workload and responsibility from the bank can free up valuable resources to focus on the core business of serving customers.

Open up to a digital future

The use of cloud, open standards and open APIs also offers the potential for banks to integrate their operations more easily with other apps across the bank, and to avail of the latest AI tools in the cloud. It also makes it easier to deploy client self-service capability on the front-end and offer full transparency, something that digitally-savvy customers have now become accustomed to in their daily lives.

The entry of new challenger banks and Fintechs to the market must be a wake-up call to incumbent players not to let up on the pace of change. Many still have hard-coded legacy software deployed on site which is difficult and time-consuming to change. But there’s no reason to hold back in moving to a SaaS-based model for areas like Trade Finance and Payments – this can still happen while work to update the legacy core and implement open APIs goes on in the background.

Incumbent banks have much to learn from the approach being taken by new digital challengers. If you’ve not already done so, now’s the time to investigate if you can transition your on-site licensed software to a more flexible SaaS-based model. A model that gives you the flexibility and agility you need to service your customers in the most effective way.