The next wave of banking innovation: insights from AWS

Charith Mendis, Head of Worldwide Banking at AWS, highlights the most impactful benefits that cloud, AI, and emerging technologies offer to banks, while unpacking the key trends set to reshape the banking landscape in 2025.

Looking back at when you first entered the banking industry, how has it evolved? What do you find most striking about its transformation?

For the last two-plus decades, the fundamental banking needs of consumers have remained remarkably consistent - whether it's accessing finance for home ownership, vehicle purchases, or investment opportunities. Similarly, banks continue to prioritise data analysis and modelling to gain customer insights, improve operational efficiency, and mitigate risk.

The most striking transformation has been in technology accessibility. In the past, implementing a new program would require significant infrastructure investment - ordering servers, installing them in data centres - a process that could take more than six months and require multi-million-dollar, multi-year commitments. Today, we can provision servers or serverless solutions in minutes, allowing for rapid experimentation and scalable implementation.

What are the key trends reshaping banking in 2025 that you are closely watching?

So many developments are reshaping banking! But we see banking organisations unified around three major trends to address the enduring needs of their customers.

1. Generative AI and agentic capabilities: these technologies are revolutionising customer and employee experiences, from streamlining onboarding processes to enhancing financial crime prevention. Recent announcements by organisations, including Itau, BBVA, and Remitly, demonstrate how banking institutions are using a combination of data and AI/ML (including Agentic and GenAI) to transform customer engagement and deliver new experiences.
2. Core modernisation: previously considered too complex, this has become a major focus for our banking customers, for three reasons. First, to deliver better customer experiences, shifting from a batch way of operating to a more real-time way. Second, to drive speed to market, our customers share that historically it would take 16-18 months to develop and release new banking products on legacy core banking platforms; those that have modernised are able to release in 4-12 weeks. Lastly, to improve the resiliency and observability of their mission-critical systems, and scale to meet increasing demands for real-time and digital experiences.
3. Ecosystem banking: we've seen more and more banking customers establish banking ecosystems or platforms that look to provide a holistic approach to servicing their customers. A good example of this is what we've seen in SMB banking, where banks are already bundling banking services with cash forecasting analytics and Enterprise Resource Planning integration to better support SMB customers.

Where do cloud, AI, and emerging technologies have the greatest impact within banks, and what are the most significant benefits?

Our banking customers use our services across various value chains – not limited to any one single area! Some of the key areas we see include:

• Customer experience (CX) - banks are taking a comprehensive lifecycle approach to customer experience, spanning from acquisition through to retention and growth. Banks we work with are leveraging vast amounts of data from multiple sources, including transactions, call centre interactions, and digital engagement metrics, to better anticipate and serve customer needs. This data-driven approach enables banks to provide highly personalised services across all touchpoints, creating a seamless experience whether customers interact through chatbots, call centres, or digital platforms. For example, NatWest partnered with AWS to revolutionise customer service through Amazon Connect and Amazon Q. By migrating their entire telephony estate to Amazon Connect, NatWest accelerated their ability to build and launch 13 new self-serve journeys—in just three weeks. With real-time insights and data-led coaching, they’ve improved sentiment scores by up to 22%.
• Lending operations - traditional lending and middle office functions have historically been plagued with friction points and inefficiencies that have frustrated customers and staff. Financial institutions are now actively implementing AI and Generative AI solutions to streamline these processes. These technologies are transforming manual workflows into automated processes, significantly reducing processing times and improving decision-making capabilities. The focus is on creating seamless, efficient lending operations that enhance both customer satisfaction and operational efficiency.
• Fraud and financial crime - in the fight against financial crime, banks are implementing enhanced data capabilities to generate deeper insights into fraudulent activities. The combination of AI and Generative AI is being used to accelerate investigations and prevent bad actors from exploiting the system. This technology-driven approach enables real-time monitoring and faster response to potential threats while reducing the burden of manual compliance processes.
• Technology modernisation - banks are increasingly focused on broader technology modernisation, particularly the shift to composable architectures. This transformation goes beyond mere technical updates – it's a business-driven initiative delivering three key outcomes. First, the move to microservices enables faster software delivery and updates – i.e., more responsive to business needs. Second, banks can implement targeted front-to-back changes rather than broad horizontal updates – i.e., better able to solve end-to-end customer needs. For example, Rocket has improved client interactions and operating efficiency with the use of AI and generative AI services throughout its operations. Finally, breaking down monolithic systems provides better visibility into system complexities, enabling more effective management and optimisation of banking operations – i.e., able to better manage risk. 

Legacy systems are often cited as barriers to innovation. How can banks overcome these challenges? Do they need to start from scratch, build in-house capabilities, or partner with tech firms?

There's no one-size-fits-all solution for overcoming legacy system challenges in banking. The most effective approach we've seen involves a carefully planned hybrid strategy that balances in-house development, strategic partnerships, and phased modernisation. This allows banks to leverage existing assets while gradually adopting new technologies and practices. The key is to create a flexible, scalable architecture that can adapt to future innovations while maintaining the stability and security required in the banking sector.

At AWS, we see most customers adopting a hybrid approach to modernise their core systems. The typical journey begins with an augmentation approach, where banks first unlock the data from their core systems and wrap it with APIs. Following this initial step, customers choose different paths forward:

• Some assess and migrate components using services like AWS Transform to accelerate mainframe modernisation from years to months with the power of agentic AI, and reduce ongoing mainframe costs.
• Others select a partner solution from our numerous core banking partners and migrate to that as their target state.
• Some take an entirely different approach by creating an end-to-end vertically integrated banking stack for new products, unencumbered by legacy applications and solutions, enabling them to move faster.

We emphasise providing choice to help our customers select the right path for their modernisation journey, whether through progressive modernisation, access to our rich partner marketplace, or support in building brand new solutions natively on AWS.

If a bank decides to modernise, what should its approach be? Is there a single best strategy, or does it depend on specific customer needs and priorities?

This really depends on many factors, such as the need, time horizon, market dynamics, and what the bank ultimately wants to achieve. We see two distinct approaches:

For organisations that are focused on improving customer experience, assisting call centres, and reducing churn, we see these banks typically begin by modernising their channels. This includes enhancing their data infrastructure and models to enable next-best-action capabilities and personalised offers.

In contrast, for organisations operating in highly competitive environments with digital banks, we see a different approach. These digital competitors, unencumbered by legacy solutions, can move much faster. As a result, traditional banks in these markets often prioritise modernising their core operating platforms to gain the speed and agility needed to compete effectively and meet consumer demands. For example, Inter, which operates in Brazil and the United States, has been modernising its technology and business by partnering with AWS for nearly 10 years. The group realised in 2016 that it would be unable to transform its business because its monolithic systems did not scale and required long release cycles. Since then, the bank has been on a journey to modernise its banking operations, breaking down monolithic applications into microservices on AWS. Today, it uses more than 4,000 microservices across 50 Kubernetes clusters to deliver changes that meet business needs.

What are the biggest challenges banks face when modernising their infrastructure?

Often, the biggest challenges for large organisations to move to the cloud or modernise the infrastructure aren’t technical; they’re about people and culture. The key reasons that banks are successful come down to a few key things.

First, the senior leadership team needs to be aligned and truly committed. And they need to be setting clear direction and expectations with the rest of the organisation to get everyone on the same page and working towards the same thing. It’s easy for others to do nothing or block things if the leadership team isn’t making the move a priority and building a culture for change.

Second, the most successful organisations start with an aggressive top-down goal that forces the organisation to move faster than it would have organically.

Third, it’s really important that organisations are trained on the cloud and comfortable with the concepts as part of the whole process. We train hundreds of thousands of people a year for that purpose.

And last, sometimes we find that organisations can get paralysed if they can’t figure out how to modernise every workload. So, we often work with organisations to do a portfolio analysis to assess each application and build a plan for what to move short-term, medium-term, and last. This helps organisations get the benefits of the cloud for many of their applications much more quickly, and it really helps inform how they move the rest.

 

About author

Charith Mendis leads global banking industry activities for Amazon Web Services (AWS). In this role, he works with leading banking and lending organisations globally to transform their existing businesses and bring innovative solutions to the market by leveraging cloud capabilities. Charith brings over 15 years of experience developing solutions for financial services organizations across Asia, EMEA, and North America. Charith has worked at Accenture, Deloitte, and KPMG on digital transformation programs.

 

 

About AWS

Since 2006, Amazon Web Services has been the world’s most comprehensive and broadly adopted cloud. AWS has been continually expanding its services to support virtually any workload, and it now has more than 240 fully featured services. Millions of customers—including the fastest-growing startups, largest enterprises, and leading government agencies—trust AWS to power their infrastructure, become more agile, and lower costs. To learn more about AWS, visit aws.amazon.com.