The Financial Sector’s Transformation for Modernization Amidst Trends
The financial sector, ranging from traditional banks to fintechs, is undergoing a crucial transformation process to modernize its systems in response to trends such as open finance, artificial intelligence, and digitalization of payments. This shift occurs in an environment where the adoption of these innovations is driven by the use of cloud services.
Cloud as a Critical Enabler
The cloud, a technological infrastructure that enables remote storage, processing, and access to information via the Internet, has become a critical enabler for these trends in the sector. According to payment infrastructure specialist Clai Payments Technologies, financial institutions seek more agile and interoperable solutions that reduce costs and allow rapid integration with the digital ecosystem.
“The trend is to migrate towards cloud-based transactional services. Both banks and fintechs are demanding agile, secure, and easily interoperable solutions that allow them to integrate with new actors and business models,” stated Fernando Carmona, CEO of Clai Payments Technologies.
Carmona explained that the cloud reduces entry barriers by offering on-demand services, preventing new fintechs or emerging entities from having to invest in costly payment platforms from the outset. He also emphasized that regulations like open finance are pushing institutions to securely share information and prepare for evolving business models, which could set precedents for cloud usage.
Adoption of Cloud Services
According to data from the Mexican Banking and Securities Commission (CNBV), by October 2024, 68% of banks, 56% of electronic payment fund institutions, 71% of collective funding entities, and 58% of SOFIPOS already used cloud services. In contrast, 47% of brokerage houses, 10% of cooperatives, and 0% of credit unions remained behind.
The Mexican Institute for Competitiveness (IMCO) considers that the adoption of cloud represents a paradigm shift in how financial institutions store and access information, as it expands their capacity to diversify offerings and increase financial service coverage.
Greater Challenge for Traditional Banking
Traditional banking faces a structural challenge: operating with platforms that are often inflexible and hinder agile integration with fintechs or new digital channels demanded by the market to maintain competitiveness.
Carmona warned that many institutions encounter a hurdle due to the lack of preparation of their platforms to respond quickly to these needs. He recalled that, according to KPMG’s “Global Tech Report: Financial Services Insights,” 58% of financial sector executives admit that fundamental business system failures disrupt their operations weekly.
“A traditional bank has a banking system, digital channels, new payment rails, back office, and reconciliation. If you multiply this complexity across various service channels, each becomes a separate world. The major challenge is to simplify these platforms to innovate faster and gain agility,” Carmona explained.
Key Questions and Answers
- What is driving the need for modernization in the financial sector? The financial sector is undergoing transformation to modernize its systems amidst trends like open finance, artificial intelligence, and digitalization of payments. The adoption of these innovations is driven by the use of cloud services.
- Why is the cloud considered a critical enabler for this transformation? The cloud reduces entry barriers, offers on-demand services, and allows financial institutions to securely share information, preparing them for evolving business models.
- What percentage of financial institutions have already adopted cloud services? According to the CNBV, by October 2024, 68% of banks, 56% of electronic payment fund institutions, 71% of collective funding entities, and 58% of SOFIPOS already used cloud services. However, 47% of brokerage houses, 10% of cooperatives, and 0% of credit unions remained behind.
- What challenges does traditional banking face in this transformation? Traditional banking faces a structural challenge due to inflexible platforms that hinder agile integration with fintechs or new digital channels. Many institutions lack the preparation of their platforms to respond quickly to these needs.
