Benefits of Cloud Services for the Banking and Financial Industry

Benefits of Cloud Services for the Banking and Financial Industry
Photo by on Unsplash

Financial institutions, the cornerstones of society, must keep up with the fast-changing and challenging times. Modernization is essential to meet customer expectations with evolving regulatory landscape, cybersecurity threats, and other risks.

Digital banking and cloud computing have changed the way we bank. Cloud banking is helping shape and changes the future of banking and financial services. Digital transformation is vital for the successful cloud adoption of banking services.

Flexibility is crucial in this fast-moving digital world and has become essential since 2020. Disruptions from natural disasters, macroeconomic shocks, and cyber attacks have shown that the financial industry needs to be agile. The Covid-19 pandemic has now heightened the need for digital transformation.

The banking sector continues delivering benefits and solutions as they aim to increase efficiency while reducing IT costs by moving away from the aging infrastructure. The banking industry steadily continues to embrace cloud technologies to manage the volumes of data that are generated every day. Rapidly scaling day-to-day operations and releasing new financial products quickly is made possible by tapping into services and partners already integrated into the public cloud.

  • The banking and financial sector spends approximately USD 67.42 billion on cloud services per year, suggests ResearchandMarkets.
  • In 2020, IBM launched a public cloud service specifically for financial services, which was created in collaboration with its first customer, Bank of America. BNP Paribas and other service vendors joined it to launch the IBM Cloud for Financial Services.
  • 80% of banks in the UK surveyed have moved less than 10% of their business infrastructure to the public cloud.
  • 80% of the banks surveyed acknowledge that cloud migration will benefit them by increasing market speed, and 69% recognize cost optimization.

The Centralized Online Real-time environment, the 'CORE' banking system (CBS), makes up a network of banking services. It connects various bank branches, allowing customers to carry out transactions of several types from any bank branch and experience the bank as a single entity regardless of location.

How does it work?

The core banking system consists of back-end servers that handle routine banking operations like interest calculations, passbook maintenance, cash withdrawals etc. For customers wanting to withdraw cash from an ATM or a branch - a request is sent to the centralized data centre, where it is processed and authenticated. The data centre contains the bank database, an application server, a web server, and a firewall to protect the bank system from cyberattacks.    

Core banking systems -

On-premises - This banking system works on a locally hosted infrastructure and provides the banking institution with various customizable options.

Cloud-based - As the name suggests, the banking system is hosted on the cloud and provides more flexibility and customization than an on-premises system.

Benefits of Cloud Computing for Banks 

Improved customer experience - By using cloud services, banking services can be accessed anywhere and at any time, leading to enhanced customer experience.

Reduced costs -  The most visible benefit of cloud computing over the in-the-premises working model is the ease of adaptability per the institution's need. With cloud hosting, organizations can scale the IT infrastructure as per need. The added advantage is there is no time latency, as there is no waiting time for scaling the infrastructure.

As most cloud services offer a pay-as-you-go pricing model, banks can reduce or eliminate on-premises infrastructure costs by moving applications and data to the cloud.

Faster processing - Cloud platforms are scalable, designed for fast performance, and can easily and quickly handle vast data transfers efficiently and promptly. It reduces transaction processing times for the bank and reduces latency.

Scalability -   Cloud computing eases infrastructure scaling capabilities and delivers IT resources as needed, including computing power, storage, bandwidth etc. Banks can benefit from this and increase or reduce cloud infrastructure per their needs.

Security - Cloud providers offer a broad range of policies, technologies, and controls that strengthen the safety of the data, apps and overall infrastructure from potential threats. Cloud providers follow stringent compliance controls and offer multiple layers of protection against data breaches, hacking, and other attacks.

Reliability -  Cloud computing data centers offer backup, and disaster recovery facilities. The data is mirrored at multiple sites, making it a more reliable option than an onsite data center.

Elimination of mundane tasks - When the infrastructure is moved to the cloud, the IT department of the financial institution is free from routine maintenance and day-to-day security. Additional staff is not needed in case of expansion and the current workforce can focus their time and energy on the specific needs of the institutions.

Despite the explosive growth, various strategies and benefits of cloud computing, there is a flip side to these benefits that ultimately deter many banking institutions from adopting cloud computing. According to a 451 research advisory, only 18% of financial institutions have broadly deployed cloud services. Some of the challenges are -

Privacy and Security - Financial and customer data is extremely sensitive and attracts a greater risk of cyber-attacks and data leaks. Privacy of customer and financial data has to be placed at its core. As per guidance issued by the European Banking Authority (EBA), banks should address these issues before considering outsourcing these services to third-party cloud services entities.

Compliance - Data security tops the list of priorities for banking or financial institutions, followed by compliance regulations and reporting standards. The Financial Conduct Authority (FCA) and European Banking Authority (EBA) have established a regulatory landscape for institutions that intend to adopt cloud services. It has become clear that banks must take these regulations seriously before it starts storing sensitive data on the cloud.

Cloud computing is here to stay and the future of banking resides in using the cloud infrastructure. Using advanced analytics, machine learning, and AI requires heavy processing power that most financial institutions may not possess or would face heavy investment in infra cost to possess. By choosing the right partner for cloud computing in banking and financial services, banks and financial institutions can utilize the benefits of public cloud services.

Similar Articles

take G suite calendar backup

Looking to export the G Suite calendar to Outlook? You are at the right place. We have drafted this technical blog to guide you on the topic. In this post, we are going to discuss different methods users can use to save Gmail folders to desktops.

Hybrid Cloud Integration: All You Need to Know

As the popularity of cloud computing continues to surge, there has been a growing focus on hybrid cloud setups. Why? Well, because of what they offer: the hybrid cloud setup allows companies to leverage the might of cloud computing without completely giving up their legacy on-premises systems.

testing tools

As a result of the ongoing development and expansion of enterprises, the use of various kinds of testing tools is becoming more widespread. It is impossible to ignore the relevance of test management tools since they provide aid to the testers in organizing their job more efficiently.

Data Engineering: How it Drives CPG Marketing’s Success

As companies across the broad spectrum of industries embrace the digital realm, there has been exponential growth in the volume of data being generated. This can pose a variety of risks and challenges, including the risk of massive monetary losses for companies.

Microsoft Cloud for Healthcare: How it has Reshaped Healthcare for Good

The healthcare sector has evolved considerably from what we knew of it, say, two to three decades ago. Now, we do not have to tell you that technology has been the driving force behind the evolution of healthcare; however, it must be noted that the impact of technology has been rather pronounced in the past few years.

FinTech Software Development Company

FinTech is an abbreviation for financial technology and describes software technology that augments, streamlines, digitizes or disrupts traditional financial services. It refers to software, algorithms, and applications that are used on desktop and mobile platforms. 

Top Programming Languages For Cloud Development

“Cloud”, a word that was once a trendy, science fiction kind of buzzword is now an undeniable part of personal and professional life. Cloud computing has created new ways in which technological resources can be used and provides several benefits like enhanced security,

Data Analytics in Retail

With the retail sector being subjected to intense change in recent years and the growing demand for digital experiences, retail businesses are now clamoring for advanced tools to help them navigate the market. This is where advanced data analytics comes in, helping retailers enhance customer loyalty, achieve more sales, etc.

Why use Python for your E-Commerce Website Development?

Python is a general-purpose programming language used for creating a variety of programs along with a wide range of applications, software & web development, automation, data science, etc.