How to accelerate cloud adoption in payments

Payment gateways could be the perfect demonstration of the power of cloud for banks.

In brief

• Banks need cloud services to reduce costs and increase agility as they compete with FinTechs and address evolving customer expectations.
• Using cloud-based payment gateway solutions can demonstrate the power of the cloud, while freeing up banks to focus on innovation for customers. 

Public cloud will transform payments experience. It offers the ability to scale up quickly and safely. It also means firms can adopt a modular approach and improve velocity of change and time to market. Regulators have made it clear that there are benefits to cloud adoption and financial services (FS) firms may gain additional operational resilience.

For most people in FS, the “why” around cloud is no longer up for debate. The question is “where” and “how” it will start to be used effectively. EY’s latest Banking Public Cloud Adoption Index (via EY.com UK) survey found that 80% of UK banks have migrated less than 10% of their business.

What has stopped FS progressing is the challenge of getting business-wide buy-in for cloud adoption. It is the classic Catch-22, as banks need to see the value of cloud before truly investing in a wider cloud strategy.

Two birds with one cloud

The challenge of deploying a cloud-based solution comes at a critical time for incumbent banks. The pandemic has increased the pace of digitization, and tech-enabled competitors have changed customer expectations. Yet many existing payment systems are expensive to maintain, and lack the agility and flexibility to change and compete.

Payment gateways, are ripe for cloud migration. It is a good example of how the cloud can add real value to a bank, potentially leading the way to wider adoption.

Advantages of using cloud-based payment gateway solutions include the following:

• There is already a mature market of FinTechs with cloud-based payment gateway solutions to choose from.
• Using a cloud-based provider would remove the expense of the necessary back-office compliance and security requirements. 
• Cloud solutions offer out-of-the-box continuous compliance against new regulations and guidelines.
• As the final payment step, they are not linked to other internal processes, so they are relatively straightforward to run as a standalone procedure with an external specialist provider.

Cloud is integral to payments future

Banks need to deliver a real-time end-to-end experience across a range of payment methods. Bank payment infrastructure also needs to deal with the substantial increases in payment volumes following COVID-19 and open banking.

Public cloud can play a key role in meeting these challenges. Taking the first step to cloud with the last-mile component of payments could be the catalyst for cloud adoption, to really start adding value to critical services. It should build confidence and belief in what cloud can achieve. It should mean the many benefits of using cloud – such as lower costs and increased agility – will become clearer. This may galvanize management to push cloud to the top of the agenda.

It can’t come soon enough for banks. More use of cloud will help provide the flexibility to change that is key for survival. Banks will then be able to compete and win in payments.