How the cloud is disrupting core banking systems across the EMEA

The  landscape for core banking systems in Europe, the Middle East, and Africa  is changing. Cloud-native SaaS systems, new technologies, and changing customer expectations are shaping how banks modernize their core systems. Gartner reports show increases in renewals and “greenfield” projects across all banking segments in the EMEA region, driven by agile digital banks leveraging cloud capabilities. These trends have accelerated significantly in recent years.

Western Europe already hosts the world’s highest share of digital financial institutions delivering services through non-traditional channels, while the top five core banking system vendors are headquartered in the EMEA region. As noted, 44% of core banking migrations moved to the cloud in 2021 in the EMEA, the highest globally.

What are the key benefits of Cloud Banking?

Cloud computing offers banks the ability to scale resources up or down quickly and pay only for what they use, while benefiting from the economies of scale provided by cloud vendors. Indeed, cloud-migrated core banking systems tend to be more flexible, scalable, extensible, and adaptive, enabling banks to support multiple services while sustaining high performance and availability. The latest cloud platforms offer enhanced security features and compliance tools that were not available just a few years ago.

At the same time, banks face pressure to transform their customer experience and driving core system renewals toward the cloud. This involves delivering engaging digital experiences that are consistent across channels and devices. The current banking environment demands seamless integration across all touchpoints.

How are customer expectations evolving?

Banks must support digital transformation and innovation by offering a modern experience with personalization at scale, real-time decision-making, automated processes, and seamless integration with third parties such as fintechs. Customers expect intuitive, consistent experiences on websites and mobile apps wherever they access them.

A cloud-based core banking solution should provide this level of flexibility to stay competitive. Recent market research shows that banks failing to meet these expectations are losing market share to more agile competitors.

Beyond improved experiences, cloud transformation enables tailored services, cost efficiencies, and new revenue opportunities through innovative products. The latest generation of cloud-based systems offers capabilities that were unimaginable just a few years ago.

Why are greenfield solutions surging?

The rise of greenfield projects in the region shows banks are choosing to build  a new, either from scratch or on modern platforms, free from legacy constraints.

Greenfield initiatives tend to be more agile, flexible, and innovative, leveraging technologies unavailable when older core systems were first created; they also avoid maintaining aging code or costly upgrades. Current market conditions favor these fresh approaches over legacy system maintenance. Their popularity is driven by customer expectations and the desire for faster, more capable platforms. The recent surge in digital-only banks has demonstrated the competitive advantages of starting fresh.

Platform renewal and consolidation are essential considerations when selecting a cloud-based core banking system. Banks aim to reduce costs and increase agility by using a single platform across multiple countries while meeting regulatory requirements.

This strategy can help achieve three objectives:

• Lower costs by reducing the number of systems to maintain;
• Increase agility by using one platform across markets;
• Support regulatory compliance with fewer interfaces between back-office systems.

APIs act as the glue that connects core banking systems to other systems and service providers, enabling integration with third-party products and services. They can also transform the customer experience by enabling new interactions via mobile devices or chatbots.

How does data sharing create new opportunities?

For banks using cloud-based systems, data sharing is a key consideration, offering easier access to storage, shared resources, and applications. It supports faster processing on remote servers and can enhance security. Current data sharing protocols have evolved significantly to address privacy and security concerns.

It can also enable new opportunities for innovation and collaboration among banks, fintechs, and other service providers, expanding financial services through tools like personal finance management and tailored lending options. The recent emergence of open banking standards has accelerated these possibilities.

To close the gap with growing digital banks in the EMEA, traditional banks should consider a core banking product with composable architecture and API-enabled microservices, Gartner recommends.

It’s also essential to consider vendors that offer public cloud options and operate in the EMEA market, as localizing a core banking system is crucial to its successful implementation.

Here at SBS, we have developed an ultra-flexible cloud-native SaaS system built according to a bank’s needs. Based on a composable platform, our core banking solution offers a range of APIs that ensures full banking functionalities and a smooth migration to the cloud.