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WHY BANKS ARE LOOKING TO THE HYBRID CLOUD FOR THEIR SILVER LINING

By George Wright, CEO, Smart Communications

A new generation of millennial customers, increased workforce mobility, and on-going digitalization are transforming the role of customer communications in the financial services industry.

George Wright
George Wright

A one-size-fits-all approach to customer communications does not work in today’s omnichannel world. Financial services companies are increasingly looking to harness Customer Communications Management (CCM) to deliver relevant, personalized interactions with customers, based on their individual needs, through multiple digital channels. The emergence of mobile technology and social networks means companies have to master an ever-growing volume of new communications channels – with 63% of millennials already accessing their bank accounts via a smartphone. Even though Which? reports the bigger banks are enhancing their mobile and online service offering, there is still room for improvement if they want to deliver relevant messaging via the customer’s communications channel of choice.

As CCM evolves, the industry is keen to reap the benefits of cloud-based software-as-a-service (SaaS) models. SaaS applications provide immediate value to financial companies as they are generally much faster to roll out than on-premises solutions, highly scalable – enabling the management of multiple customers at once, and provide constantly evolving software.A recent survey commissioned by Smart Communications in conjunction with Celent Research,assessed the current adoption of cloud-based CCM systems by businesses within financial services including banks, insurers, wealth managers, and pension funds.

So what is driving movement of financial services companies towards cloud-based CCM models and how will this trend develop?

Benefits of cloud-based CCM

There are a number of factors motivating financial services companies to deploy their CCM systems in the cloud. The first is the need to rationalize legacy correspondence systems, which do not benefit the business user and can hinder the provision of a personalized customer experience. The second factor relates to the commercial model, as cloud-based systems provide companies with the opportunity to convert fixed infrastructure costs to variable costs, and to adopt a usage-based licensing model.

Finally a cloud-based system is generally quicker to implement than on-premises solutions,as well as more flexible and agile than on-premise deployments, allowing companies to scale up resources and add functionality as and when it is necessary. Financial services companies are now looking to solutions that can support faster development of innovative products while bringing in new functionalities to support digitalization while lowering operational costs.

Enhanced mobile channels will be a key focus for developing CCM solutions in the short term, with almost three quarters (73%) of survey respondents expecting an increased emphasis on mobile for improving customer communications.Additional requirements in the near future may include customer journey analysis, integration with marketing campaign systems, the functionality to produce truly interactive documents, and the ability to leverage real-time communication tools such as social media and instant messaging. All these will need to be easily integrated into systems to support the evolution of CCM in an increasingly customer-centric world.

Evidence of a wider cloud strategy

Financial services companies already use full cloud SaaS in many areas of their business outside of core customer communications. Nearly a quarter (23%) of companies surveyed use SaaS systems for marketing campaign generation, and almost half (49%) report this as their preferred option. Although the survey looked largely at the use of CCM systems, it also revealed almost a third of respondents already intend to apply outsourced models to a majority of their CRM, HR, and ERP systems, providing evidence of a wider cloud strategy.

The application of cloud-based models is still relatively low for activities such as complex ad hoc document generation, with only 4% already using SaaS solutions for this purpose. This indicates companies need further education about the benefits of switching to full cloud SaaS in operational systems such as customer communications. When it comes to placing CCM fully in the cloud, concerns about data confidentiality are the most prevalent with 93% of respondents citing this as a high to very high concern. However, the report demonstrates there is clear evidence of movement towards cloud-based models across the financial services industry, which will only become more widespread,as previous fears are addressed and allayed. 

The hybrid cloud as a stepping-stone

There is one deployment model that is increasingly favored by financial services companies as it mitigates some of their key concerns. This model is the hybrid cloud, and almost 40% of respondents cited it as their preferred option when replacing their legacy, on-premises solutions. The hybrid cloud is a variant of a SaaS model where customer data stays securely inside the bank or insurer’s firewall during the document creation process, but is combined with cloud-based template design and content management. The hybrid cloud presents an ideal stepping-stone for the financial services industry as a solution that sits between traditional on-premise deployment and the full cloud approach.It enables companies to enjoy the many benefits of a cloud-based SaaS model while reassuring those who may be hesitant about moving to a full cloud solution.

 Like most verticals, the majority of systems within the financial services industry are shifting towards the cloud. And as communication within the industry continues to evolve and be impacted by changing customer preferences– with a growing emphasis on effective, real-time interactions and personalised messaging – the hybrid cloud will become the deployment model of choice as a bridge to full cloud adoption. The hybrid cloud provides the flexibility and commercial advantage of a cloud-based SaaS model while also guaranteeing data confidentiality and network security, providing banks, insurers and other financial services with that much sought-after silver lining.

Click here to download a complimentary copy of the Celent Research report.