The current state of banking and financial services shows that major players, often following a “one-size-fits-all” model, are struggling to keep up with the latest needs of consumers, specifically when it comes to speed and accessibility. This has allowed digital banking challengers to break new ground, with over 20% of all current accounts in the UK predicted to belong to neobanks by 2025.

A tailored approach to modernisation is the way forward and we’re going to tell you why.

Composable banking: why is it important?

To embrace change, banks need to differentiate and scale their products rapidly. This is best done through a composable design infrastructure. Composability allows for the rapid and flexible assembly of independent components, removing vendor lock-in and siloed banking systems.

During the pandemic, downloads of finance apps increased by 15%, with mobile fintech applications outperforming banks by a factor of up to 10.8x, signalling that change is on the horizon. With this, Bain & Co. reports that 54% of consumers trust a big tech company with their money more than a bank.

In response to consumer demand for simple and transparent small-business loans, ABN AMRO launched their digital spinoff New10, which leveraged a composable design and delivery method.

After selecting Mambu for the core engine and deploying on AWS, New10 launched a minimum viable product and six months after the official launch, 2,000 new accounts had been registered, with more than 65% of these as new customers to ABN AMRO.

The shift in attitude towards banking and the need for flexibility with their finances has led to consumers turning to the digital banking challengers who are more equipped, and agile with their products and offerings.

Migrating to the cloud

Cloud banking is on the rise because of its simplicity in user experience for banks and their customers. For the incumbents to take this digital approach, they need to implement a modern core to transform their legacy systems. If they fail to migrate, McKinsey predicts incumbents will see a profit decrease of up to 60% by 2025.

With an unbanked population of nearly 11 million in South Africa, TymeBank utilised the speed and agility offered by Mambu’s cloud banking engine to deliver innovative services to underserved segments of the economy. By migrating 85% of their operations to the AWS cloud platform within six months, they were able to halve their operational costs and have signed approximately 100,000 new customers a month since their launch in 2019.

However, it’s not just banks migrating. Other financial players such as Western Union have also transitioned to the cloud as they develop more digital services like their digital banking app, WU+. Through a native cloud platform, Western Union’s new digital offering helped them transform the transactional relationships into closer customer-centric connections.

If banks and other financial institutions wish to reach modern consumers, the power of the cloud must be embedded into their strategic and operational approach. Cloud banking offers flexibility, cost-savings and scalability.

It’s important to note the shift: Banks were previously made to last, but now they must be made for change.

Learn more about our composable approach here.