The world is evolving at an alarming pace, even in the wake of a pandemic. Some say the pandemic accelerated technological advancements, while others decelerated it. One thing is sure; the world is not the same it was two decades ago at the beginning of the millennium. The cloud was not even an idea in the late 90s. Now it is seated at the head of the table. Industries, even the financial services industry that is not too keen on upgrades and massive changes, are starting to understand the cloud’s crucial role in modernization. 

Modernization of core legacy systems in banks

Core banking platforms built on legacy systems are ill-suited to create the customer experiences of newer players in the financial service market. Legacy platforms are too rigid to allow banks to be agile, and they can’t manage many of the digital experience requirements.

There is clear progress since modernization is becoming a necessity, but this demands careful strategic planning and implementation to overcome the issues stated below:

1. Customized core systems are frequently under-documented.
2. The majority of legacy systems are not real-time.
3. The parameterization of hard-coded business rules is uncommon.
4. Difficulties in meeting market expectations.
5. Adapting to changing regulatory requirements.

Dodging the challenges posed by outdated legacy systems

To stay relevant, banks must overcome the challenges of outdated legacy systems. What are their options?

1. Refactor existing legacy code: The user interface, batch, and APIs are core banking application elements to modernize.
2. “Big bang” modernization: A complete transformation program that replaces the legacy core banking system with a modern core banking system.
3. A gradual transition: Large banks dealing with several banking applications catering to various business lines, capacities, products, and processes benefit from a staged, progressive strategy.

The following steps are crucial while making decisions about core banking system upgrades:

• Establish the requirements and capabilities needed to enable and support the bank’s future objectives. 
• Determine the types of transactions a bank would like to handle and the customers it would like to offer services.
• Understanding the applicable regulatory framework.

Banks can consider and choose from the modernization alternatives indicated above if they keep those principles in mind.

How Cloud Encourages Financial Inclusion

Financial inclusion is critical in re-igniting the global economy after a pandemic. It can boost economic growth and support innovation. Cloud drives financial inclusion. How?

Fintechs and banks have collaborated to develop cloud-based financial products that have transformed finance throughout the SEA region. Cloud banking technology is agile and can offer new products faster than traditional banking technology.

Cloud fintechs could help central banks modernize and expand payment infrastructures to be more inclusive. For example, Clik, a cloud-based Cambodian payments aggregator, will work with the National Bank of Cambodia’s own retail payment innovations.

Digitalization and cloud adoption in Southeast Asia

Southeast Asia’s six significant countries comprise one of the world’s largest and fastest-growing regions, with 570 million people and a surging GDP anticipated to reach $4.7 trillion by 2025. By resolving the fundamental underlying issues, one may realize the enormous potential of the financial services business in the region.

Fintech companies and banks are transforming financial services in Southeast Asia with innovative cloud-based financial products. Continued collaboration between fintech companies and banks is critical to the future of the financial services industry and the technology sector. 

The role of the government

The most important factors to consider while digitizing everything will be favorable government rules and policies. Complete digitization requires a deliberate regulatory push for financial inclusion, electronic know-your-customer (KYC), and licensing to allow virtual banks to operate even more freely. Southeast Asia’s digital financial services industry will attain its full potential if these factors are present.

Change is on the horizon. Consider the regulatory sandboxes in Singapore and Thailand, which allow businesses to try new ideas in a controlled setting under the supervision of regulators. A National Strategy for Inclusive Finance, launched by Indonesia, aims to grow the economy by expanding the banking services. All these changes serve as an indication of what’s to come. With governments embracing the idea of digitization, complete digitization is not a pipe dream.

What next?

Cloud infrastructure will be a critical bridging technology, enabling smooth data exchange and improved processing power. Cloud-based services can provide IT infrastructures that are economical, simple to use, and highly customizable, and adaptable.

Corporate banking must become more rigorous to stay up with the growing digital scene. Banks must look for partnerships with Fintechs to achieve this. Many banks have started realizing the importance of modernizing their systems to cater to the varying needs of their customers.