Cloud Banking Next Step In FI Modernization

With estimates that over 500 billion real-time payments will be processed over the next five years, the race is on for upgrades and integrations that allow financial institutions (FIs) and their clients to participate in a real-time payments space that is expected to reach nearly 53 billion real-time payment transactions by 2024.

The FI’s Guide to Modernizing Digital Payments, done in collaboration with Red Hat, details developments in real-time payments, providing insights and direction for FIs that are now ready to invest in a payments market that represents new revenue streams – for the prepared.

The future of real-time payments is tied closely to cloud banking, and as more FIs migrate in that direction, the manifold benefits of real-time payments are propagating beyond the biggest players.

“Banks and other businesses are well aware of the advantages of real-time payments … with a survey of more than 500 company executives indicating that 71.9 percent are ‘very’ or ‘extremely interested’ in these payments’ capabilities,” the August guide states.

All of that “extreme interest” is converting to action, as more FIs lay the groundwork for real-time capabilities, either internally or through partnerships with experts in the space to accelerate efforts.

Adaptability and Scalability

Cloud banking is an evolution and a convergence of online banking and mobile app capabilities that are always on and available, wherever customers have a smartphone connection. With the pipes, devices and apps already in place, the onus is on FIs to get busy implementing.

“To [make the most] of the adaptability and scalability of the cloud, these interconnected systems need to accelerate the adoption of a cloud-native architecture. These architectures rely on robust built-in automation so that [the platform can adjust capacity automatically] as volumes change,” Ramón Villarreal, global architect of financial services for Red Hat, told PYMNTS.

“It also means that high-impact changes can be made more frequently and predictably with limited effort, so that banks can quickly make adjustments and ultimately drive innovation. Lastly, these cloud-native architectures can take advantage of built-in instrumentation so that system health is self-regulated and the customer expectation of an always-on experience is met,” he said.

Advantages Found in the Cloud

Self-regulating financial systems sound too good to be true – and it’s not quite that simple. But cloud-native architectures are more resilient, as COVID-19 has proven.

“Cloud payments come with a number of advantages over their traditional counterparts. The first is improved speed, shown by the adoption of cloud technology from global payments network SWIFT. This network is quickly becoming more popular as a replacement for correspondence banking models, partnering with BNY Mellon and Microsoft to enable payments at 11,000 FIs in more than 200 countries around the world. This partnership will remove the need for FIs on the SWIFT network to have their own on-site payments technologies, which SWIFT’s Chief Information Officer Craig Young explained would improve the speed and consistency of transactions conducted on the network,” per the new Guide.

“Cloud computing is a key enabler of a faster, frictionless future and a powerful catalyst for innovative new services,” Young said.