Cloud computing has been on the radar of many CTOs, CIOs, and CFOs. Being one of the rapidly developing technologies it has gained massive traction in recent years. In fact, the cloud has been an enabler of many other disruptive technologies including big data, IoT, AI, etc. Cloud computing is also a proven solution to many core banking problems. The common concerns of banks like interoperability, 24x7 uptime, secure storage etc. are all addressed by cloud. In this blog, we will examine the benefits, applications, and concerns regarding the use of cloud computing in banking and financial services.
Cloud computing is expected to grow from $67B in 2015 to $162B in 2020 securing a compound annual growth rate (CAGR) of 19%. (Source - Forbes)
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Must Read: The 5 Benefits & Role of Cloud Computing in Digital Transformation
Cloud computing comes with many benefits some of which are especially worth considering for banks. Here is an overview of the most basic yet impactful benefits of cloud computing in banking, finance, and insurance:
Cloud computing allows the bankers to save capital expenditure involved in establishing IT infrastructure for varying IT needs. A huge load of capital expenditure is converted into comparatively nominal operating expenses. This allows banks and financial institutions to focus on core banking functions and leave IT complications to experts.
The cloud infrastructure is highly reliable. By opting for private or hybrid cloud model it is possible for banks to secure their data while enjoying the speed and flexibility of the cloud. Even in the case of public clouds, the data can be encrypted and additional layers of security like permission-based access can be added to boost the level of security. No to forget that the data remains safe from many internal security threats.
The major reason accounting for the popularity of cloud is its pay-as-you-use billing model. This means that you will only need to pay for the resource you use. Banks and other financial service providers can manage the spikes in demand without investing in expensive in-house computing power, much of which would go unutilized under normal conditions. In case of cloud, it is also easier to pivot from one application to another making it a flexible choice.
Know more about the benefits of Cloud Computing
Cloud computing has been around since the 1960s. Though the major innovations started with the launch of Amazon Web Services (AWS) in 2002. Now there are many web applications that are rendered through cloud computing. Here are some applications of cloud computing in banking and finance:
To ensure secure transactions and smooth customer experience banks need 100% uptime. In-house IT systems need periodic maintenance during which it becomes difficult to provide continued service. Cloud, on the other hand, can guarantee 99.999% uptime by ensuring server availability even during the time of maintenance. Hosting of mobile and web apps also ensures better speed to the users.
Major banks already use cloud computing to initiate payments and funds transfer. Cloud ensures security and unified customer experience. Not to forget the maximum uptime that we discussed above also ensures that payments are processed securely from one end to another without any hitches.
Enterprise Resource Planning (ERP) and Customer Relationship (CRM) software are the most popular applications rendered through the cloud. Accounting for 50% of total usage, Software as a Service (SaaS) is one of the most popular methods of leveraging cloud computing. It allows the vendor to control the application and provide better support. For users, it allows for remote access and easy installation.
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Like any technology cloud computing also comes with limitations. Here are some precautions that be taken by banks while deciding to move to the cloud:
Security in the cloud servers has been the primary concern of the entire banking and finance industry. The confidentiality and security of financial information of customers and internal company data are of paramount importance. Using an encrypted cloud service and storage of sensitive information in private storage are two common ways of managing the risk.
Many regulatory bodies in the banking and finance industry require the financial data of bank customers to be stored in their home country. There are also some compliance guidelines requiring the data to not be intermixed with other data. Hence the use of shared servers or databases is not recommended.
To ensure maximum security and optimal utilization of cloud resources you should consult experts in this field. This is where our skills can come in handy. If you are looking for specialists who can guide you towards utilizing the cloud for IT needs then feel free to get in touch.