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Podcast: For Modern Banks, Evolution Leads to Customers As Key to Success

  • Bank infrastructure has changed
  • For modern banks, customers are more important than money
  • The Cloud has become more and more integral

Michael Haney, head of product strategy at Galileo Financial Technologies, recently spent time with Hal Levey, senior writer at PYMNTS, discussing the fact that banking infrastructure has undergone a significant evolution over the past few decades -- an evolution that’s important to both customers and their money.

Mr. Haney explained:

"There's a misperception about bankers and banking. That misperception is that money — in all its forms — is the most important asset. The reality is that customers are the most important asset, because if there are no customers there is no money."

CUSTOMER EXPERIENCE inscription, social networking concept. Business, Technology, Internet and network concept. 3d illustration

Bottom line: Customers, not money, are the most important asset for banks.

The Cloud Becomes Vital

At the same time, Mr. Haney and Mr. Levey go on to point out that banks are no longer feeling the need to build, own, and operate their own data centers, purchase hardware, or build everything in-house. They're increasingly becoming more comfortable -- as the definition and construct of core banking systems changes -- with getting their infrastructure, platforms, and software in a service model from the cloud, said Haney.

In fact, when examining the evolution of core banking systems over the past 40 years, Mr. Haney and Mr. Levey identify some key points in the course of their discussion, including:

  • Customers, not money, are the most crucial asset for banks.
  • Banks are moving away from building and owning their own data centers and infrastructure, and instead are adopting cloud-based core banking services.
  • This allows banks to focus more on customer engagement, product innovation, and risk mitigation rather than back-office processing.
  • Core banking systems have become more limited in scope, focusing on being the system of record for customer accounts.
  • Technological changes have enabled trends like open banking and embedded finance, which are improving financial inclusion.
  • Younger consumers expect always-on, real-time banking with a great user experience, driving changes in the industry.
  • Open banking frameworks are transforming customer data control and use cases in banking strategies.

The Cloud and Open Banking

Over the past month, we've covered the topic of "open banking" and its importance to the industry. The cloud is a major component of open banking, as it enables financial institutions to integrate new technologies through APIs.

There are a variety of use cases incorporating the cloud, including check processing. Many banks choose to leverage the cloud through their service bureau or core provider, which deploys technologies like Anywhere Recognition to automate processes. However, banks that choose to utilize a private or public like AWS or Azure are able to leverage the same solutions through APIs -- sending images and receiving the results in real-time or batch.

This is also a method that FIs utilize for check fraud detection. Check images are scanned and sent through an API or real-time to a fraud engine like Anywhere Fraud and the results are returned to their fraud review platform for their analysts to review the flagged items. These results can also aggregate results from other fraud engines, such as transactional analytics and consortiums, to provide a more robust fraud review.

For so many decades, FIs worked in closed environments that required heavy IT resources to maintain their systems -- particularly on-premise environments. With the cloud and open banking, FIs are able to offload these resource-draining tasks and incorporate the latest technologies to service their customers.

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