Exploring the digital future of financial services with Microsoft


Technology has always driven change within the financial services industry, but never has the pace of technological advancement been as high. So, we recently spoke with Albert Welgraven, Microsoft’s Financial Services Industry Director for Western Europe, to hear his view of how technology is impacting financial services.

According to Welgraven, the acceleration of digitalization impacts the sector in four ways:

  • Higher customer experience expectations
    Customers demand the same great experiences they get in other industries. Generally, banks are finding it difficult to deliver these elevated standards, and the gap between the leaders and laggards is widening.
  • The competitive landscape is changing fast
    Previously, the only competitors that big banks and insurers faced were other banks and insurers. Enabled by technology, we’re seeing significant competition from FinTechs, big tech, cloud providers and even retailers. The pressure is on for incumbent banks and insurers to step up and invest in technology to keep pace with these nimbler competitors. FinTechs and Insurtechs are challenging and disrupting the traditional value chains, leaving traditional banks and insurers commoditised activities with low revenue potential but high costs and regulatory requirements.
  • New technological capabilities are emerging rapidly
    Cloud solutions are opening new opportunities for those unable to afford expensive on-premise solutions. With almost unlimited computational power available on demand, new solutions that were previously out of reach to many are available to all almost instantly.
  • Increased risk and regulatory scrutiny
    Financial regulators have become much more involved in established banks’ and insurers’ risk management and regulatory processes. This leads to increased caution and a focus on shoring up existing systems and processes, which demands development resources and time.

Welgraven is convinced that banks can ill afford to ignore the digitalisation trend. “Banks don’t have a choice. They need to innovate and keep up, or else they will eventually be outcompeted. There is still time to catch up, and lately, we’ve seen a massive transformation in the workplace, application platforms and business processes. We are, however, yet to see this on a large scale, but we at Microsoft believe it is only a matter of time before it accelerates.”

“The pandemic has drastically accelerated the need for digital transformations. Banks had to continue their businesses and were forced to adopt digital solutions; we’ve seen banks using MS Teams integrated with Dynamics 365 to continue their business online,” says Welgraven. “But the most important change we’ve seen was probably in their mindset towards technology. They have now realised, and implemented, some really good possibilities that today’s technology enables. Yet there is an enormous potential to address.”

One key area of potential is in migrating to the cloud. In Welgraven’s opinion, there are three key benefits to making such a move:

  • Optimisation
    Cloud solutions give banks the ability to continue to do what they do, but faster, cheaper and with more flexibly. The potential gains depend on how optimised the existing on-premise solutions are. As an example, banks are using cloud solutions for risk management. They still process a lot of data on-premise but can now use the cloud during activity peaks, taking advantage of the scalability of computational power that the cloud has.
  • Redesign
    Cloud solutions open transformation possibilities that don’t exist with traditional on-premise solutions. This is because the investment needed to gain the equivalent additional computational power for short periods would just not be cost effective. Now this additional power is at the bank’s fingertips. In addition, they can enrich existing datasets with external data and use algorithms to gain more insight into their data. For example, a Dutch insurer is now able to proactively handle claims after a natural disaster. It sends drones equipped with IoT devices to scan for damages and starts the claims process if any damage is identified. This could never have been done in the pre-cloud era, and the result is a claims handling process of 30 days or less rather than a year.
  • Reimagine
    Cloud technology also opens the path to the formation of new business models and partnerships. A wonderful example is Rabobank in the Netherlands, which is using a new cloud-based platform to bring together farmers in developing countries who plant trees with businesses that want to offset their carbon emissions.

Case Study 1: Rabobank
Rabobank has launched an agroforestry initiative aimed at sequestering CO2 while enhancing smallholder farmer practices in developing countries. This online platform connects large corporates looking to offset their emissions with smallholder farmers who are sequestering carbon through agroforestry. The initiative also helps farmers improve their business model by transforming monoculture farming into future-proof agriculture.

This initiative connects farmers to corporations to match supply and demand of sequestered CO2. By planting trees on their land, farmers in developing countries can offer the CO2 sequestered by their trees to large corporates on a platform developed by Rabobank in cooperation with Microsoft. Companies can purchase the sequestered CO2 to offset their own emissions. The goal is to create a global and transparent platform to empower farmers while building a scalable climate change solution. The platform is expected to launch in 2022.

Source: Rabobank to announce initiative to tackle global CO2 challenge while enhancing farmers’ businesses

Despite the obvious benefits technology can provide, why are banks and insurers not moving faster?

“With today’s technology, there’s a vast array of opportunities. In our experience, the main hurdles are the current legacy infrastructure, the perceived regulatory limitations and the digital maturity of banks and insurers,” says Welgraven. “A conditional step for digital transformation is data. Banks have been excellent at collecting data, but the next step is to use this data to replace manual processes with automated ones, to create an entirely new and seamless customer experience. We have yet to see a bank deliver a truly seamless experience on a par with big tech companies, but moving a larger part of their banking services to the cloud will most definitely help. It will give them more data, which leads to more intelligence and therefore a better service.”

But not all firms are approaching cloud migration in the same way. “Neobanks tend to choose Software as a Service and cloud-based core banking, whereas bigger banks tend to run their own subscription and usually start with customer related applications. And when it comes to core banking, they start with payments services – core banking is like a heart transplant. That’s usually not what you would want to start with.”

Yet one major bank, Benelux, is planning to move their core banking application to a banking-as-a-platform solution within their own subscription to the cloud. “It’s still uncommon to do that in an early phase of the cloud journey for major banks, but we believe core banking will become an increasing part of the focus and approach.”

Case Study 2: UBS
Nearly three years into its cloud adoption initiative, UBS is reaping an array of benefits while leveraging a “once-in-a-lifetime opportunity to change how we operate,” according to Mike Dargan, Group Chief Information Officer at UBS.

The leading wealth manager’s move to cloud, including Microsoft Azure, is enabling UBS to respond faster to its clients’ needs and maintain security, a cornerstone of the financial industry, Dargan says.

Cloud has also bolstered the company’s business flexibility – which has been key to managing through the pandemic – while also providing better outcomes for clients, increased agility for its engineers and the ability to reimagine how it builds applications, Dargan says.

Headquartered in Zurich, Switzerland, UBS began its work with Microsoft in 2017 and formed a strategic partnership with the company in 2018. UBS is pursuing a hybrid cloud setup with a third of its applications hosted in on-premise private cloud solutions, a third in the public cloud and a third remaining on its mainframe infrastructure.

Source:How cloud is keeping UBS ‘ahead of the game’ | Transform (

Smaller neobanks are often entirely cloud-based, whereas the bigger banks have more of their computational power on-premise. Welgraven continues about neobanks: “Microsoft has worked with several new-built digital only banks (Moey, Flowe, Clearbank, Anglo Gulf Trade bank and others) and what, in our view, made these banks and their concept successful is that they built their bank with what the customer is asking in mind. They did that based on highly flexible data platforms that enable them to be very agile. So again, the data is the foundation of digital transformation. Actually, these cases could be a really valuable source of inspiration for the incumbent banks.”

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