Digital Payments

Becoming Efficient, Adaptive And Real-Time To Thrive In A Digital World

Becoming Efficient To Thrive In A Digital World

“The reality is that many banking processes aren’t yet able to fully take advantage of the cloud, and are relying on systems that can’t automatically adjust capacity.” 

“What has become apparent over the past 12 weeks,” according to Alessandro Petroni, head of financial services strategy at Red Hat, “is that organizations that had started down a path to modernizing their technology and processes to better compete digitally were more equipped to adapt and scale. Addressing these weak links moving forward will help to ensure that banks can adapt to changing volumes and improve the resilience of their services.”

The following is an excerpt from How 35 Execs Are Powering The Great Digital Shift Of 2020 (And Beyond), contributed by Alessandro Petroni, head of financial services strategy at Red Hat.

The pandemic has exposed the weakness of digital laggards. The effect has been both immediate and profound, a stress test for digital banking and commerce. Notable brands in the United States who relied on physical commerce saw a steep drop in revenue. The pandemic also demonstrated the critical nature of technology to support customers digitally. It remains an open question of whether those that have failed to adapt will be able to recover or will face the unceremonious demise of their businesses due to the pandemic.

It isn’t all doom and gloom, though. The pandemic has put the digital economy into overdrive. Companies will have another chance to make fans out of customers who might have been reluctant to transact digitally in the past. Winning over net new digital converts and servicing them through lower-cost channels can help mitigate some of the economic pain from the ongoing pandemic.

The abrupt move to digital banking and commerce has led to significant increases in mobile deposits and payments across the globe. In the United States, for example, Citi saw an increase of 84 percent in mobile deposits in the month of May. In turn, this is accelerating the pre-pandemic trendline in reducing the size of the branch network. The remaining branches and the way customers interact with them will likely never be the same again.

What has become apparent over the past 12 weeks is that organizations that had already started down a path of modernizing their technology and processes to better compete digitally were more equipped to adapt and scale. With critical components migrated to cloud platforms, these businesses were able to automatically adjust capacity based on the deluge of digitally generated traffic.

However, this digital rush has also exposed weak links. Outages were experienced by several banks. The reality is that many banking processes aren’t yet able to fully take advantage of the cloud, and are relying on existing systems that can’t automatically adjust capacity. Addressing these weak links moving forward will help to ensure that banks can adapt to changing volumes and improve the resilience of their services.

This new “digital normal” might be the nudge organizations need to accelerate the migration of their core banking and payment systems to cloud platforms. It’s an area of the bank that has been difficult to modernize in the past due to the cost and complexity of migrating to a cloud platform. At Red Hat, we have made investments with our core banking and payment partners to make it easier to connect to systems and host these critical services on the cloud. We do this knowing our customers wish to progressively modernize their critical banking services on the cloud infrastructure of their choice, without resorting to the painful “rip and replace” approaches of the past.

Read more executives’ insights on the COVID-19 crisis in How 35 Execs Are Powering The Great Digital Shift Of 2020 (And Beyond).

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New PYMNTS Report: The CFO’s Guide To Digitizing B2B Payments – August 2020 

The CFO’s Guide To Digitizing B2B Payments, a PYMNTS and Comdata collaboration, examines how companies are updating their AP approaches to protect their cash flows, support their vendors and enable their financial departments to operate remotely.

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