The financial services sector is undergoing rapid change as fintechs develop convenient, consumer-focused services that were once the province of traditional banks. We spoke with Siddhartha Gupta, Global Head of Application Modernization on Azure at Tata Consultancy Services (TCS), about this trend and what financial services organizations need to do to improve their capacity for agility and innovation.\n\nWhat are the greatest challenges that financial services firms face with their digital transformation initiatives? \n\nMany established financial institutions have very good core business capabilities, but their technology platforms tend to be archaic and rigid. A modern bank must have an agile, open, and intelligent systems architecture to deliver the digital services today\u2019s consumers want. That is very difficult to achieve when the systems running their business functions are resistant to change. This is the fundamental digital transformation problem that financial services organizations are facing.\n\nThese organizations have two choices: They can modernize their architecture and develop the technology they need in-house or collaborate with fintechs to do it for them. Many established banks are doing both\u2014using the Microsoft Cloud to create a secure innovation bed as well as working with fintechs or buying some of their cutting edge technologies. The need of the hour is to transform business applications from monoliths to smaller, independently designed capabilities that can easily change and scale.\n\nAcross the globe, financial organizations are using cloud-native apps to create everything from payment platforms and credit card tools to systems for managing corporate rewards. Like the retail and media companies that adopted cloud-native services before them, financial institutions are learning that the more agile their technology is, the more customers they will attract.\n\nWhy are traditional financial services firms feeling an increased urgency to adopt a cloud-native approach to applications? \n\nTraditional financial organizations are competing with digital native firms using technology as a key differentiator to draw customers. For these companies, offering user-friendly services such as digital wallets, lightning-fast payment platforms, and easy access to credit have become established norms. To remain relevant, traditional financial services firms must become as cutting-edge as fintechs. They must develop services that are more innovative, resilient, fast, and agile than those traditional banks can create.\n\nThis competitive landscape is increasingly driving banks to adopt a cloud-native approach to applications. To succeed, they must first build a culture of development within the organization. That means business units must be the owners of the applications they use, and they must work closely with application architecture and build teams to create world-class, innovative capabilities keeping in mind security and compliance.\n\nOrganizations must also be willing to continually adapt to change, which occurs almost daily in today\u2019s business environment. They must adopt innovations as soon as they become available. A cloud-native architecture, which is designed for openness, makes that possible.\n\nHow can cloud-native applications help financial organizations drive innovation at scale? \n\nA cloud-native approach drives innovation in several ways. It begins at the development stage, in which the business service owner, the solution architect, and the technology team all work together to develop effective microservices. Each party adds their expertise from the beginning, creating a seamless flow that eliminates arguments and time-consuming revisions down the road.\n\nThe second important characteristic of cloud-native applications is their flexibility. Business units can deploy and scale applications independently to serve their customers\u2019 needs. They are not blocked behind a traditional monolithic system, and they can scale their services faster. When each business unit operates at maximum efficiency, the organization as a whole becomes more agile and responsive.\n\nWhy is the Microsoft Cloud the right environment for both financial services companies and the fintechs that serve them? \n\nThe Microsoft Cloud offers the right blend of services to help large or small financial services organizations create business-critical platforms and applications. One of the most valuable services is the Microsoft Azure Kubernetes Service, which enables teams to build high-performance and resilient containerized applications that are always on.\n\nAnother strength is the Microsoft Cloud\u2019s ability to enable \u201cappification\u201d and real-time integrations, which are key to achieving growth in today\u2019s markets. We are seeing financial services institutions use these capabilities to create dealership networks and build new monetization models for mutual fund distributions, portfolio management, andother digital services.\n\nThe Microsoft Cloud also helps financial services companies achieve their mandate of maintaining a secure, compliant environment and preventing fraud. Built-in AI and machine learning capabilities give financial institutionsbetter visibility into their threat landscape, enabling them to proactively manage incidents while reducing alert fatigue.\n\nHow does TCS help financial organizations with application modernization? \n\nWe see application modernization not just as a technology or architecture change, but as the gateway to a culture of innovation. We help organizations build that culture with our cloud-native development method, which is based on the Three Horizon Journey framework we use to help all businesses achieve digital transformation.\n\nOur TCS Azure Application Modernization Service is a comprehensive offering designed to guide organizations on their digital transformation journeys. It helps banks and fintechs create a clear cloud strategy and a path for moving to an architecture that facilitates cloud-native applications and opensource technologies\u2014the foundation of themodern financial enterprise.\n\nLearn more about how to build agile, cloud-native applications on the Microsoft Cloud.\n\nSiddhartha Gupta, Global Head of Application Modernization on Azure, TCSSiddhartha Gupta has over 25 years of experience helping global customers in the financial services, banking, healthcare, publishing, professional services, and retail sectors in building applications andsystems that are focused on creating business value. He is a proponent of the TCS cloud modernization strategy and adoption paths and evangelizes the adoption of cloud-native applications and integrations to drive business benefits.