Financial services firms are increasingly investing in the cloud, especially as technology such as generative AI matures, opening up opportunity to scale, streamline, and personalize services. Yet there’s still a gap between the volume of dollars spent and the value generated. Simply stated, countless banks and insurers can do more to successfully maximize their investments.
Why not? In our view, it is because some haven’t truly adopted a bold, cloud-first approach. As a result, they’re missing out on ways to fully capitalize on opportunities that deliver quantifiable dollar value. Maybe their data quality is poor, or too often it remains in silos across legacy systems instead of integrated with cloud-based infrastructure.
In comparison, organizations that have gone all in are enjoying big benefits. Case in point: in Q1 2024, Nubank marked a staggering 64 percent increase in year-over-year quarterly revenue after it adopted a cloud-native digital-only approach. Today, the Brazilian neo-bank serves over 100 million active clients.
A strong cloud foundation is essential, as is efficient end-to-end operations, but Capgemini’s research indicates that only 12 percent of banks and insurers are true “cloud innovators”. Joining their ranks doesn’t require magical thinking as much as a shift in mindset. Take JPMorgan Chase, for instance. Some might consider the centuries-old US financial institution a legacy bank, but it is a disruptor, automating the customer onboarding process using an API-driven cloud platform for faster product innovation. In 2023, it realised a year-over-year increase of 35 percent in top-line value in this area.
Global Head of Cloud for Financial Services at Capgemini.
Cloud adoption is not a means to an end – it’s part of the journey in continuous innovation
The real requirement companies overlook involves a cultural evolution throughout the enterprise. And that’s where the key lies to unlocking top-line growth. With the infusion of generative AI across the financial sector, banks and insurers are changing significantly. They’re becoming more data-driven, more cloud-focused, and exponentially more customer centric.
However, organizations that have been successful in their cloud journeys share something in common: they’ve been more intentional in their overarching aims and tactics. For some, that journey involves engendering a superior customer experience. This can be offering an omnichannel approach to positively impact the entire ecosystem – being available and ready to meet clients wherever they are. For others, it’s about narrowing their focus to achieve differentiated top-line growth, like insurers using CRM to excel at developing customer profiles and personas.
Financial institutions are blessed with troves of client data. We are seeing the “cloud innovators” utilize this high-quality data into their generative AI investments across the banking and insurance value chain. This could be from pre-onboarding to payments, the latter closely tied to complex and costly anti-money laundering (AML) and data-protection requirements. Everything is connected, or ought to be, when data is used efficiently and effectively in the cloud. And there’s power in partnerships. Along with the expected hyperscalers, other ecosystem players include fintech and insurtech companies that offer expertise, whether helping to adjust go-to-market strategies or develop customer-experience offerings.
Regulatory pressure intensifies but opportunities remain
Naturally, the associated first- and third-party data collected are information goldmines, but client security and privacy remain paramount. This is particularly true with global cybercrime on the increase and evolving regulatory requirements and legislation. In the US, updates to Section 1033 of the Dodd–Frank Act will give consumers more rights with regard to personal data. Across the European Union, the 2023 Digital Operational Resilience Act (DORA) has just gone into effect requiring banks to reassess how they regard risk and resilience against such threats.
In this world of open finance, we can anticipate more “Nubanks” entering the fray. Innovative banks, not surprisingly, don’t see these changes as onerous, but as opportunities to build transparency and trust with clients. A true competitive advantage. The flexibility of cloud services, for instance, offers dynamic scalability, so keeping the costs of risk and compliance in check is easier. Once again, mindset is the key. Innovators don’t get fixated on finances, they see such pressure points as opportunities for positive change, especially when linked with a personalized customer experience.
On the insurance side, innovators are making data-driven decisions across the operations, from product development to claims, renewal and servicing. They integrate traditional and third-party data for the underwriting process and also actively leverage data during claims process to automate claims triage, identify fraudulent claims, and estimate damage value.
Exciting opportunities for innovation are constantly on the horizon, especially when leaders are willing to challenge conventional thinking. Generative AI delivers huge potential for both financial institutions and insurers to achieve more nuanced insights, supported by human expertise, across the value chain. Organizations that have a firm, cloud-based foundation are the ones that consistently – and continuously – find new ways to enhance their operations and generate positive revenue growth.
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