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At a Glance
As a result of disruptive technologies and innovations, unprecedented changes have happened in numerous industries, including Financial Services and Digital Banking. Both the cloud and SaaS have decreased infrastructure costs, allowing goods to be generated, disseminated, and changed more quickly and providing unparalleled dependability, scalability, and security. Because cloud-based SaaS systems are continually updated, banks benefit from the latest developments.
Unprecedented developments have occurred in many industries, including Financial Services and Digital Banking, due to disruptive technology and breakthroughs. As can be seen, cloud technologies have brought various advantages to the stage, such as resource optimization and cost reductions.
Digital technology has the potential to have a “game-changing” influence on financial inclusion, according to the IMF. Increases in mobile phone usage were cited as a potential to provide financial services to disadvantaged populations.
To take advantage of new financial inclusion possibilities, inclusive banks will need advanced banking technology. Cloud computing and the SaaS delivery paradigm are critical.
Inclusive banks emphasize financial inclusion or providing financial services to disadvantaged and low-income people at a reasonable cost. Temenos has had them as a customer for more than two decades, and our financial inclusion solution was the first core banking system to be placed on the public cloud.
Financial institutions are learning about the benefits of a “Pay-as-you-go” approach, which means that when utilizing Digital Banking cloud-based services, there is no need to make a significant upfront investment and pay for what is used.
Cloud and SaaS provide a different approach to managing a bank’s IT infrastructure. Core banking and the digital front office are hosted in a public or private cloud rather than on the bank’s own physical infrastructure. Banks must pay a monthly fee to use the solutions.
Both Cloud and SaaS have reduced infrastructure costs, enabling products to be produced, distributed, and modified more quickly and provide incredible reliability, scalability, and security. Banks benefit from the newest advancements since cloud-based SaaS solutions are constantly updated.
According to a Temenos report, smartphone adoption is predicted to reach 74% in the Middle East and Africa by 2025 and 78% in Latin America.
Here are some of the advantages of using SaaS and the cloud for financial services.
Cloud and SaaS provide a cost-effective pricing model that allows banks to avoid substantial capital expenditures (Capex) required for costly up-front IT investments. It also eliminates the high recurring expenses of maintaining outdated “spaghetti software” infrastructure or hosting data centers in-house.
The operating expenditure (Op-Ex) model of cloud and SaaS needs a much lower monthly subscription. Given the challenging climate in which banks now operate, this is critical. Low borrowing rates are affecting company margins and driving demand for new items. At the same time, as FinTechs gain traction and conventional banks develop digital-only brands, competition is heating up.
These pressures are felt much more strongly by inclusive banks. Inclusive banking products must be supplied at a low cost to the client by their very nature. According to the World Bank, about 60% of unbanked people in Latin America cite cost as a factor for not having a bank account. The quantities served are also small, and they include traveling to remote and thinly inhabited parts of the globe. Without significant levels of automation and mobile distribution, profit margins may become unsustainable.
Inclusionary banks may pass on the cost savings from Cloud and SaaS as low-cost banking services. They may also spend more of their limited resources on providing consumers with personalized experiences and responsive services.
You don’t have to keep an infrastructure that can handle your most crucial probable requirement all of the time if you use inclusive banking. Mobile banking is a good example. Mobile banking provides inclusive banks with a fast-growing potential. In the next five years, Orange Bank in West Africa, a collaboration between Orange and Bancassurance business NSIA, hopes to acquire 10 million customers in Senegal, Mali, Burkina Faso, and the Ivory Coast.
While traditional banking channels have ‘peaks’ at different times of the day, our mobile phones are always with us. The cloud and SaaS are particularly well suited to this paradigm because they have ‘elasticity,’ meaning they can grow during peak periods and contract during quiet ones. Using typical on-premise systems to provide this capacity would need an expensive overprovision.
The potential for Cloud and SaaS in Latin America and Africa has been restricted until recently due to a lack of local servicing. The good news is that big cloud providers are now establishing themselves in Africa, and capacity has more than doubled in the last three years.
- Increases Scope
With financial exclusion not restricted to developing countries, in the United States, according to reports, 6.5 percent of households are unbanked, and 16 percent are underbanked. Cloud and SaaS may help inclusive banks in rich countries as well.
Millions of people have become more financially insecure as a result of the present economic crisis. In addition, because cloud and SaaS solutions enable new products to be tailored to client demands and swiftly brought to market, they have aided banks in standing up for their consumers during these difficult times.
As the crisis worsened, Temenos made a set of Cloud and SaaS-based COVID-19 solutions accessible to banks. In less than two weeks, Atlantic Union Bank in the United States delivered approximately $1.4B in US Government Paycheck Protection Program loans to 6,500 companies. Another allowed banks to utilize AI-powered technology to identify vulnerable firms and connect them with the right solution to help them.
The advancements in digital technology that have occurred recently represent a once-in-a-generation opportunity for banking. As the IMF points out, inclusive banks have the potential to expand financial inclusion on a massive scale. It’s a challenging climate for inclusive banks, but cloud and SaaS technology can help them make a significant difference.