Financial news

Australia’s financial sector is experiencing a profound transformation, driven by the rise of digital banking. Traditional banking, once synonymous with brick-and-mortar branches, is now rapidly evolving through mobile apps and strategic partnerships with fintech companies.

Here Aaron White, vice president and general manager at Nutanix, a provider of cloud software offering organisations a single platform for running apps and data across multiple clouds, explores this shift, highlighting how established banks are embracing digital innovation.

Digital products have changed the way Australians engage with financial institutions, and more simply, how they choose to make payments.

Once existing in the realm of servicing at branches with tellers, the big four banks more commonly today engage with customers through mobile apps. For many, partnerships with and acquisitions of fintechs are what make digital banking capabilities possible.

While initially, fintechs’ success saw them pitted against traditional banks, the two are now strengthening ties. Because fintechs unbundle financial services into individual offerings and leverage cloud-based technologies to make them more accessible to everyday Australians, banks are hopping on the bus.

Two years ago, National Australia Bank (NAB) took over neobank 86 400 to flesh out the bank’s digital subsidiary, UBank. In the same year, Bendigo and Adelaide Bank bought Up, which has since drawn over $1.5 billion in deposits, and largely from a younger demographic.

These young aggressive companies are digital by nature. Their digital bones allow traditional banks to shortcut innovation cycles and speed go to market. In essence, they’re not beholden to the same legacy systems as traditional banks, per the analysis by DataM Intelligence.

As these partnerships deepen, we’re seeing banks double down on their digital transformation progress. Beneath the new apps and interfaces is a requirement to advance base layer infrastructure – its modernisation is essential to safeguarding performance and agility within the wave of digital banking innovation.

Strength in clouds together

Infrastructure modernisation is particularly relevant under the weight of current economic headwinds. Much to the tune of the broader economy, banks require flexibility to scale infrastructure up and down in order to handle changing market conditions and fluctuating demand.

As banks ready for a possible recession and digital banking matures to meet the expectations of customers today, traditional financial services capabilities such as processing transactions and lending management are being moved to run in environments that are more accessible and efficient, otherwise known as public and private clouds.

While for the longest time we saw financial services take a cautious approach to cloud adoption, the tide is turning. And we’re seeing something more sophisticated unfold – the industry’s adoption rate is accelerating across all modes of cloud.

Cloud is not merely being thought of as a ‘destination’ but in fact a ‘tool’ – a tool that understands there is no one-size-fits-all. Some workloads might be suited to one public cloud provider, some to a different public cloud, while others might need the control, security, and data sovereignty of a private cloud. Because rarely, if ever, will a business perform best on a single cloud provider.

According to the fifth-annual Nutanix Enterprise Cloud Index (ECI) report, hybrid multi-cloud – where applications become mobile between multiple different public and private clouds – is accelerating among financial organisations. This year, 64 per cent of surveyed financial services organisations cite using multiple cloud environments, surpassing the global average of 60 per cent. The outlook is promising compared with the previous year’s findings which showed the industry lagging global adoption of the hybrid multi-cloud approach.

This trend is underpinned by the fact that just like every financial services organisation is unique, the same is true of every application, workload, and dataset within each banking business.

Mountains of data, secured for customer satisfaction

While the competition between banks and fintechs has eased to some degree, Australia’s financial institutions are still eager to keep a finger on the innovation pulse. Doing this means having a firm touch on customer experience, while safeguarding business and consumer data.

The digital era’s explosion in volume and value of data makes it invaluable in meeting and beating consumer expectations. This will only increase as financial organisations turn to machine learning and AI to automate operations, create intelligent applications, and deliver personalised and actionable services to customers.

Data, ultimately, is one of the most valuable resources for financial services when it is harnessed to its full potential. Applying a hybrid multi-cloud strategy is at the centre of unlocking those possibilities because it allows workloads to run where they’re best suited while balancing the need for security and control.

Because financial organisations deal with highly sensitive customer data, financial transactions, and proprietary information, they are prime targets for cybercriminals. The ability to uniformly apply security and data governance policies across an ecosystem is essential in today’s threat-prone digital landscape.

Unsurprisingly, the aforementioned ECI report found that cybersecurity is a priority for the financial sector given the increasing sophistication of cyberattacks. With applications, workloads, and data distributed across different cloud environments, financial institutions spread their risk by removing single points of failure.

Australia is home to a booming digital banking sector with global fintech rankings marking it sixth in the world. Despite dealing in dollars, it could be said data is the most valuable asset at a bank’s disposal, but for too long that data has laid dormant in the labyrinths of legacy infrastructure. As Australia’s financial institutions continue to collaborate and unlock innovation, they unleash the full potential of data and digital.