Microsoft Cloud for Financial Services — Architect Perspective

Financial institutions have embraced digital innovation at a recorded pace to adopt new ways of working, serving the financial needs of customers, and keeping the markets performing. Moreover, they have done so while still operating within their control frameworks and regulatory requirements needed to serve in all parts of the world.

According to the 2020 Frost and Sullivan Global Cloud User Survey, “multi-cloud adoption has skyrocketed among financial firms in the past year, up nearly 70%. In addition, hybrid cloud adoption — already higher among financial firms than other industries — is up 8%. In response to the pandemic, financial firms are accelerating their cloud journeys, knitting together disparate IT environments (on‑premises, edge, and multiple clouds) as a foundation for digitalization.”

To increase the customer’s resilience and agility, Microsoft recently announced the availability of Microsoft Cloud for Financial Services (MCFS) with new capabilities for retail banking.

5 Financial Services Trends of 2021

COVID-19 has changed many processes and priorities of banking, leading to the urgency of new approaches and strategies. This also created several opportunities for which banks need to scale their operations, reinvent and redefine themselves. Following the top priorities and trends that banks are considering:

1. The banking industry’s market value has already taken a big hit during the 2008–09 crisis. But the industry is in a stronger starting position to weather the storm. Banks are well capitalized, but they are still constrained by legacy and not operationally flexible enough to handle surges in customer demand.

2. Banks need to optimize costs and protect profit. As a result, there will be a significant rise in non-performing loans during the next 18 months. The 15 largest US banks have set aside $76bn to cover projected bad debts; the 32 largest European banks have set aside €56bn. In addition, a zero-interest-rate environment has significantly reduced net interest margins.

3. Banks need to be thinking about growth. There are issues around the ‘Trust deficit‘; retail banks will lose 5% of revenues through not putting customers first. Personalization is critical. Banks should consider offering more financial advice. Sustainability is a powerful emerging theme. For example, Millennials (25% of the US population) are poised to inherit $30 trillion intergenerational wealth transfer and want greener banks.

4. Banks have adopted AI tools and practices successfully that accelerate the automation of simple operations in existing workflows. But to use AI only for essential functions to run faster is limiting its capabilities. Instead, technology leaders should generate ways to use AI’s full capabilities that scale their deployments and increase the industry’s overall performance.

5. As the world changes rapidly, the expectations for innovation are also evolving. As a result, banks and leaders should always have a clear and robust strategy, such as cloud adoption, or how they will participate in the increasingly open ecosystem.

Cloud Imperative for Financial Services

Financial firms need sophisticated analytics tools for innovation, intelligent app development platforms, cost-efficient approaches, etc. To fulfill these requirements, they are looking for flexible and agile cloud infrastructures. To meet these goals, financial firms worldwide are rushing to adopt hybrid and multi-cloud solutions, offering them the flexibility to create, host, and manage data and apps across multiple infrastructures. Financial firms choose public cloud IaaS/PaaS/SaaS solutions for many business apps, which offer cost-effective, on-demand availability and automated scalability.

According to the survey, 45% of financial services institutions use Microsoft Azure to run their cloud applications and data. Additionally, 94% say they are satisfied or delighted with their Azure services. Azure users cite Microsoft’s single-tenant cloud option and the ability to deploy the Azure stack in their on-premises data center or branch. These options allow firms to leverage hybrid cloud benefits for their most secure data and apps.

Banking, capital markets, and insurance institutions have leveraged the capabilities for financial services available in the existing Microsoft Cloud to deliver differentiated customer experience, improve employee collaboration and productivity, manage risk, and modernize core systems. So, What’s the buzz and need for “Microsoft Cloud for Financial Services”? First, let’s look deeper into Microsoft Cloud for Financial Services (MCFS).

Microsoft Cloud for Financial Services (MCFS)

Microsoft announced the availability of MCFS public purview on March 31, 2021, which aims to provide new cloud-native capabilities, delivering intelligent, customer-centric, digital experiences suitable for the financial services industry. It will offer comprehensive digital technology to retail banking and focus on enhancing employee collaboration, productivity, risk management, modifying core systems, and providing differentiated customer experiences.

MCFS cloud unlocks new value creation through:

1. A comprehensive platform for automation, collaboration, and omnichannel communications.

2. High-value workflows and enhanced customer experience with comprehensive customer insights.

3. Personalized customer interactions while meeting the customers where they are.

4. Removing data silos to turn insights into action.

MCFS is an end-to-end, industry-specific cloud that includes existing and new capabilities that unlock the power of Microsoft Azure, Microsoft 365, Microsoft Dynamics 365, and Microsoft Power Platform to innovate for responsible and sustainable growth. Microsoft’s robust partner ecosystem extends the platform’s value with new solutions to handle the urgent challenges that the financial services industry is facing today. MCFS is powered by a Common Data Model (CDM) for financial services and tools for pro-developers and Citizen developers.

MCFS cloud platform will transform insights into action by applying cutting-edge artificial intelligence (AI). Powered by a Common Data Model (CDM) and tools for professional tech developers and citizen developers, MCFS allows its partners and consumers to add new value with extensions and next-generation solutions easily.

What makes the MCFS unique is the focus on accelerating FSI customers and partners journey to unlock new value creation through a comprehensive platform for automation, collaboration, and omnichannel communications for high-value workflows, enhances customer experience with comprehensive customer insights, personalizes every customer interaction while meeting the customers where they are, and modernizes core systems.

MCFS will help customers by bringing together disparate data sources across the financial services value chain, enabling customers to realize the actual value of their data by enriching core business processes and turning data into actionable insights. MCFS will improve AI-based models to turn insights into action. In addition, MCFS will help financial services organizations with Cloud adoption as per strict security, privacy, and compliance industry requirements.

Architecture of MCFS

MCFS has created new opportunities for its partners to empower intelligent banking, modernize trading, and personalize insurance software systems. With Microsoft Azure, financial organizations have the infrastructure and security to take customer experiences to another level.

Some of the key partners of MCFS are BioCatch, blueprism, Cognitive Scale, Duck Creek, DXC.technology, FINASTRA, Fiserv, Milliman, NICE.

Four Capabilities of MCFS

1. Customer Acquisition and Engagement

This aims to improve the banking customer experience by consolidating data across the industry to design an extensive view of customers. This platform will accelerate customer growth, profitability, and loyalty by personalizing actions to resonate with customers and providing more relevant customer insights. Acquisition and Engagement of Customers include the following capabilities:

a. Increase customer lifetime value and loyalty

It allows you to tailor customer experiences by giving you a 360-degree view of customer experience data and suggesting consumers’ next action. It also brings together customer data such as customers’ financial, behavioral patterns, and demographic data essential in improving customer lifetime value and loyalty.

b. Remote sales and service

This cloud platform will enable you to build strong virtual connections with customers through secure virtual meetings and constantly engage with them via SMS and chat. In addition, it will streamline the booking experience by enabling them to schedule and manage appointments online.

Advisors at the bank will get a 360-degree view and an integration of marketing and sales data, providing flexibility and heightened security.

2. On-Boarding, Servicing, and Support

Simplify onboarding, automate processes, enable collaboration, facilitate omnichannel communications with customers, and enhance the digital banking experience.

The global health crisis led to new digital channels to continue the seamless engagement to reach customers. This helped customers in many ways, such as eliminating the need to visit banking halls.

Capabilities of the MCFS in this area include:

a. On-boarding of customers easily

Microsoft technology has improved the process by providing customers with easy access to loan apps and self-service tools. This capability enables customers to access loans conveniently and quickly. In addition, streamlining the loan process will enhance the customer experience and employee productivity.

b. Banking and engaging customers

It personalizes customer interaction by providing deep customer insights that help engage with them on their preferred channels. It intelligently manages service journeys across channels, using sentiment analysis to reduce churn and time to resolution. Additionally, it will handle the service journeys with customers by using sentiment and reducing churn.

c. Loan management

It enables automation and a seamless flow of communication between the front and back offices. As a result, it accelerates the lending process, reduces errors, and improves customer satisfaction.

3. Risk management

MCFS will manage all the financial data by providing them a competitive advantage over other entities. Capabilities in this area include:

a. Financial crime protection: It will help you protect your systems against fraud with AI technology that constantly adapts to the evolving fraud patterns.

b. Risk analytics: It will allow you to take advantage of scalable compute and analytics to power modeling, insight, and regulatory reporting.

4. Improvement of Enterprise Operations

The current global scenario demands data-centric and agile financial operations to increase new services to fulfill their customers’ requirements. MCFS will help banking accelerate their operating system and services that will help them personalize older batch-based core systems to operate in a more agile, data-driven real-time way. In addition, it will employ multi-cloud and hybrid strategies to create core systems that improve the current banking needs.

Partner Play

Microsoft is investing in the partner ecosystem to help partners do business with us. They lowered their transaction fee to help partners create value on the MCFS platform. This announcement made at Microsoft Inspire, among others, reinforces the commitment to assisting partners in getting to market faster, building apps for every customer need, and scale through our channels.

Financial services organizations need assistance designing, implementing, and managing their hybrid multi-clouds — and they’re willing to pay for it. The number of financial firms planning to add managed and professional cloud services is expected to increase by 37% in the next two years. As a result, managed services providers would do well to introduce services specifically geared to the unique needs of the financial services segment.

MCFS comes to life by combining what Microsoft and their rich partner ecosystem are doing to scale, build, enrich, and unlock intelligent and connected capabilities across the end-to-end value chain. Financial services partners do this in five key ways, as listed below images.

How SI Needs to Change

Suggested changes in the SI business model and solution design approach from long drawn custom development to:

1. Faster and Lean migration to public Cloud and distributed Cloud for cost-saving and IT agility.

2. Outcome-based migration, modernization, and Managed Services for Cloud workloads.

3. Invest in developing regional finance, payment, and privacy compliance controls and associated automation for security and compliance as code bundled with managed SIEM and SOC solution or complete managed cybersecurity services bundle.

4. Avoid bespoke solutions and adopt composable solution architecture based on the foundation provided by financial services cloud solutions (e.g., MCFS) for innovation in business models, new supply chain, re-imagined channels, financial instruments, and customer experience (AR/VR/MR). Customer on-boarding, personalized marketing, and financial planning. AI/ML-powered solution in domains like risk exposure, fraud detection, anomaly detection solutions, and integrated process optimization and Integration.

5. Accelerated development using low-code, no-code platform, hyper-automation:
In addition to providing significant cost savings, these enterprise low-code solutions help streamline, automate, accelerate, and increase the efficiency and performance of the app development process. As a result, enterprises no longer need to utilize only software developers.

6. Deliveries aligned to faster time to market and market innovation on top of Healthcare common data model: Common data model simplifies data management and app development by unifying data into a known form and applying structural and semantic consistency across multiple apps and deployments.

7. Bring best of niche industry partner ecosystem relationships and expertise for composable solutions: This concept enables computing, storage, and networking devices to be pooled and used as needed without requiring physical configuration, opening the door to a nimbler environment, in which resources are not only accessed quickly but also used precisely.

8. Bring in cross-industry integration, learnings, and develop new decentralized computing-enabled business models and solutions.

Conclusion

Banks have already started their cloud journey but, after Covid-19, it became a permanent solution overnight. As a result, financial services are looking forward to cloud platforms to keep internal and external operations running seamlessly.

MCFS provides the best service to their customers and deeply analyzes their demands to help differentiate them in the marketplace, enhance customer relationships and productivity. 

Its flexibility also empowers financial institutions to process large numbers of transactions quickly, even when there are massive spikes in the volume of requests. In short, MCFS is a catalyst for much-desired accelerated digital transformation and to match the agility and disruption from Fintech startups.