What You Need To Know About Data and Cloud Modernization in the Banking and Insurance Industry

When TSB attempted to migrate its legacy IT systems to a new cloud-based infrastructure in 2018, it resulted in a catastrophic failure. This issue primarily arose from reliance on outdated infrastructure, fragmented data practices, and insufficiently tested migration procedures.

Over a million customers lost access to their banking accounts, leading to weeks of disruption and substantial financial penalties, including £330 million in remediation costs and significant reputational damage.

While that incident occurred seven years ago, it illustrates how a lack of proper data and cloud modernization adversely impacted a financial institution. Today, data and cloud modernization is critical for businesses looking to remain competitive, agile, and secure.

According to Hussain Qureshi, president at mobileLIVE, “some banks and insurance companies have age-old systems— e.g. mainframe based applications installed in their network— and their biggest challenge is the working knowledge of those applications.” He continued by noting that “very little or no documentation exists on the process flows, application integrations, databases and workflows.. To further complicate the problem; people who had knowledge have either retired or moved on to more modern systems.”

This is the problem that cloud and data modernization aim to solve. Data modernization involves transforming outdated, siloed data architectures into flexible, cloud-native ecosystems that support real-time analytics, artificial intelligence (AI), and advanced decision-making. And cloud modernization describes the migration of legacy IT infrastructure to cloud-based platforms, reducing costs and enhancing scalability and security.

For instance, Italy’s largest bank, Intesa Sanpaolo, upgraded to a cloud IT infrastructure last year, according to Reuters, in a strategic move that included launching a cloud-based digital bank, Isybank, and a plan to migrate all banking operations to the cloud by the end of 2025.

That’s one big example of how cloud and data modernization is reshaping the banking and insurance industry, and there are even more examples of such. Yet, for some other financial institutions, harnessing the benefits of cloud and data modernization has been an uphill battle.

In this article, you’ll find out how to rewrite that story. But, first, in what ways have cloud and data modernization impacted the banking and insurance industry?

Cloud and Data Modernization is Reshaping the Banking and Insurance Industry

According to a recent report by Business Insider financial giants like JPMorgan Chase and Bridgewater are leveraging AWS’s AI tools for massive data processing, enhancing both scalability and security. This highlights how critical cloud infrastructure has become for success in the banking and insurance world.

When it comes to the impact of cloud and data modernization on the banking and insurance sector, it transcends large institutions. Smaller banks and even insurers are also enjoying several benefits.

As Qureshi noted, “modernization of infrastructure is no longer a luxury; it’s a necessity. Customer expectations are evolving rapidly with an increased demand on real time access and hyper personalization which is heavily dependent on data-driven decisioning.”

He explained that customer expectations from smaller banks and insurance companies are often more personal - i.e. providing a white-glove service especially when compared to services from the larger banks. Hence smaller banks and insurance companies are under more pressure to leverage technology.

“Unifying data will allow them to have best in class data-driven decision making, resulting in better customer insights, fraud and risk management as well as having access to on demand scalability, which also results in significant savings in operational costs and efficiency,” Qureshi said.

The impact of cloud on the industry includes, but isn’t limited to the following:

1. Enhanced Decision-Making

Modern data infrastructure enables banks and insurers to break down data silos by unifying disparate data sources into centralized data lakes and advanced data warehouses. This consolidation allows for the application of predictive analytics and machine learning-driven insights, transforming raw data into actionable intelligence.

With a comprehensive, real-time view of operations, financial institutions can optimize risk management, detect fraud early, and fine-tune their product offerings, thereby making smarter, faster decisions.

2. Operational Efficiency

Streamlined data processes significantly reduce redundancies and lower operational costs, freeing up resources to invest in innovative services and customer solutions. By automating routine data management tasks and integrating modern analytics platforms, institutions can achieve greater efficiency across all operational facets.

A detailed report from Cognizant illustrates how automation and enhanced data workflows are enabling insurers to reallocate efforts toward strategic initiatives and customer engagement.

3. Regulatory Compliance

One of the biggest challenges banks and insurers face when implementing data and cloud modernization strategies is navigating the complexities that come with complying with the General Data Protection Regulation (GDPR), Payment Card Industry Data Security Standard (PCI-DSS), and International Financial Reporting Standard 17 (IFRS 17).

But by moving to cloud-based systems, banks and insurers can benefit from automated compliance tools and secure data storage solutions, thereby mitigating compliance risks and reducing the likelihood of costly breaches.

Qureshi noted that cloud modernization allows for a “continuous compliance rather than scheduled or periodic compliance checks. “Cloud modernization allows for all systems and databases to be connected and available which enables the required proactivity of the system. In addition cloud providers offer built in security and compliance infrastructure which can be scaled as per requirement,” he explained.

4. Customer Experience

In a competitive market, customer experience is paramount. Modernized data architectures empower institutions to harness AI and machine learning to offer personalized, customer-centric services.

By analyzing customer behavior and preferences in real time, banks and insurers can tailor products and services to individual needs, resulting in enhanced satisfaction and loyalty.

Qureshi weighed in on this, noting that “solutions like tailored investment advice, instant automated adjudication for loans, targeted and tailored promotions based on user transactions, behaviours and preferences” are a major impact that cloud modernization has had on the industry.

5. Innovate Products and Services

New financial products and services can be developed and implemented quickly thanks to modern data platforms, which serve as the foundation for innovation. Banks can develop customized financial solutions and insurers can create usage-based insurance models that dynamically price risk based on real-world behavior if they have access to comprehensive, real-time data.

In addition to satisfying changing consumer demands, this degree of personalization creates new sources of income. Such product innovation agility can play a pivotal role in drawing in and keeping customers in a fiercely competitive market.

6. Enhance Agility

Financial institutions can react quickly to changes in the market and in technology thanks to a modernized data infrastructure. Flexible, cloud-native architectures that foster ongoing innovation have replaced legacy systems, which were frequently unwieldy and compartmentalized. It allows banks and insurers to quickly adapt to new regulatory requirements, integrate cutting-edge technologies like blockchain and artificial intelligence, or respond to abrupt changes in consumer behavior.

This agility is crucial in the current unstable economic climate. Such an infrastructure can greatly increase a company’s competitive edge through streamlined operations and faster time to market.

Making Modernization Work for You

As banks and insurance companies continue to navigate an increasingly digital financial landscape, the push toward data and cloud modernization is now non-negotiable. Forward-thinking financial institutions that proactively adopt modern data architectures and cloud-based solutions are positioning themselves for the resilience that’s needed in a volatile industry.

But modernization also comes with its own challenges, especially for organizations burdened by legacy infrastructure and complex regulatory environments.

As Qureshi noted, ”attempting to lift and shift the applications without knowing the detailed working of the application results in poor performance and missing the true benefits of cloud.” In addition, he said, “not having a good data migration approach as most legacy systems have fragmented or inconsistent data. Combined, these significantly increase the risk when migrating those applications.”

“Fortunately, however, AI has helped us to solve this problem. At mobileLIVE we have crafted an AI-based solution that helps to extract all the information from the code repository, meaning that we can reverse engineer the documentation from the application code itself. Our AI-based tool extracts the business logic, application flow, application interactions and integrations. Once these have been documented, humans in the loop can update the documentation keeping into consideration the targeted techstack,,” Qureshi noted.

He believes that this approach helps address the first two challenges by ensuring the application components are carefully rehosted, refactored or retired to ensure that the real potential of the cloud can be achieved. “A holistic and unified approach to data migration is necessary to ensure the data is cleaned, cataloged and aligned to ensure reliable results can be achieved with improved insights and compliance,” he said.

Without a doubt, the banking and insurance industry is at a pivotal moment, where organizations must go beyond playing catch up with technology, but actually be at the forefront of innovation. The decision to modernize can no longer be about keeping up. Rather, it must be about defining the future of the financial industry and your place in it.

“In uncertain market conditions, an enterprise needs to cut unnecessary costs, retain its customers, maximize its revenue, and ensure no losses due to compliance, risk or fraud. Luckily, modernization has a role to play in each of these segments, enabling operational efficiency, improved customer revenues, increased revenues, and enhanced compliance,” Qureshi concluded.