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Technology Ecosystem

Clouds and Cores: The Path Is Clear, Incremental, and De-Risked

Jack Henry Associate
Sep 20, 2023

We asked 118 bank and credit union CEOs if a public, cloud-native core will be a part of their strategic technology plan over the next two years.

Of those 118 CEOs surveyed, one-third plan to include a public, cloud-native core in their strategic plans within the next two years. Learn how bank and credit union CEOs are embracing the public cloud to compete successfully and differentiate strategically in our annual Strategic Priorities Benchmark Study.

Key Insights from the Jack Henry™ 2023 Strategic Priorities Benchmark Study:

  • Financial institutions with asset sizes of $500M-<$1B (45%*) and >$1B (48%*) are much more likely to have a public, cloud-native core in their strategic plans.
  • As banks and credit unions become more knowledgeable of cloud technologies, they also acclimate to the incremental, de-risked migration paths that cloud-native components and architecture make possible.

The Bigger Picture: The Public Cloud

The cascading inflection points of 2022 have placed an even higher premium on strategic agility, real-time data strategy, and modern tech stacks in 2023.

While economies of scale drove the initial adoption of cloud computing, an underlying shift is quickly making the public cloud the only option for most computing applications – especially mission-critical, time-sensitive, transactional applications.

Behind the scenes of modern computing is a wide array of powerful, public-cloud tooling that is critical to the services and apps we rely upon every day. What’s more, is developers of those services and apps are designing them to be cloud-native.

To access the latest analytical algorithms, the most advanced and effective security services, the fastest, real-time data management, and the best zero-trust environments for privacy – you have to be in the public cloud.

The Future of the Public Cloud

According to a recent survey by Arizent, 80% of U.S. financial institutions expect to have at least 20% of their apps in the cloud in 2023.[1] In fact, more than one-fourth of banks and credit unions plan to have over 50% of their apps in the cloud, with nearly 40% indicating cloud-based architectures as a top spending priority in 2023.

While the journey to full-service, cloud-based core banking systems are still in its early stages, the relative costs of doing nothing are rising.

Cloud-native development allows you to benefit from continuous innovation and deployment, enhancing speed to market and reducing the resources required to make changes – a critical component of success in an environment regularly upended by new inflection points and market shifts.

Cores designed for composability via microservices architecture also provide the ability to deploy and enhance standalone applications quickly.

The cloud is also driving new industry pricing standards.

As scalability becomes much more elastic, it becomes feasible to offer usage-based cost models in which organizations only pay for the capacity they consume. The ability to eliminate the costs of excess capacity coupled with a lower overall cost of ownership will ultimately make it easier, faster, and less expensive to operate your financial institution.

In this way, cloud architecture levels the playing field between small and large providers.

Side Core vs. The Public Cloud

In recent years, pressure to go to market quickly with a separate digital brand or a one-off offering led some financial institutions to deploy a “side core” in the cloud.

Because side cores are not full-service cores, they cannot run your entire financial institution, adding complexity, operational fragmentation, and technical debt.

Given the flexibility of cloud-native architecture, some full-service legacy cores are unbundling and rebuilding each of their functions as micro-services on the cloud. By doing so, banks and credit unions have the opportunity to modernize their cores over time and eliminate the pain of a rip-and-replace conversion. This approach de-risks your gradual conversion to a fully modernized tech stack – providing rollback to any legacy core function in the interim for any reason.

No matter the final state of evolving full-service, cloud-native cores, the benefits of modern, public-cloud architecture and design are clear and compelling.

The expertise and skills required to manage cloud infrastructure, however, differ from those needed to manage traditional, on-premise IT. To remain competitive, banks and credit unions should begin developing cloud competence and recruiting the talent necessary to optimize cloud-native management of data and applications.

Discover how you can benefit from a flexible, cloud-based core banking system.

Click here to contact a Jack Henry expert.

[1] United States 2023 Predictions: What to Expect in the Year Ahead - Brace for the Short, Prepare for the Long: Financial Institutions Calibrate Priorities for 2023, Arizent, accessed August 22, 2023.

[2] What to Expect in the Year Ahead - Brace for the Short, Prepare for the Long: Financial Institutions Calibrate Priorities for 2023, accessed August 22, 2023.

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