Modern banking is all about digital technology adoption and availability of synchronized information at a warp speed. Banking customers want transactions to happen in a fraction of a second. Since everything is across the internet a lag in statement updates can lead clients to freak out. Also speed is of utmost importance when it comes to trading online as a second of delay can lead to major losses. When we think about all these constraints of online banking, cloud computing in banking and finance poses an encompassing solution.
The need for cloud computing in banking and financial services
According to a survey by Deloitte, 70% of consumers consider a consistent experience across channels to be extremely or very important in choosing their primary bank. This sets the banks and financial services institutions to explore for a technological solution that can collect and process data from multiple channels at a high speed. This might also require infrastructure modernization and upgrade from legacy systems.
According to a Gartner report application modernization stands out to be the most prior factor driving banks towards cloud adoption and 70% of the respondents are expected to increase cloud spending.
Popular use cases of cloud adoption by banks
These examples demonstrate how banks are embracing cloud technology to streamline their operations, improve cost efficiency, and capitalize on the diverse services provided by major cloud providers like AWS and Microsoft Azure. Cloud adoption allows them to focus on innovation, scalability, and security in a rapidly evolving digital landscape.
Bank of America
By building its cloud infrastructure, Bank of America has managed to save an impressive $2 billion annually in infrastructure costs. This cost reduction was achieved by reducing the number of servers from 200,000 to 70,000 and consolidating data centers from 60 to 23. Embracing the cloud has likely improved their efficiency, scalability, and overall IT infrastructure management.
Wells Fargo
As part of its digital transformation efforts, Wells Fargo is utilizing Microsoft Azure for its cloud infrastructure. They have successfully migrated strategic business workloads, including data centers, to the cloud. This move is likely aimed at gaining the benefits of Azure’s robust services, such as improved data management, scalability, and enhanced security.
Goldman Sachs
Goldman Sachs is leveraging Amazon Web Services (AWS) to transform its internal operations. They have implemented AWS solutions for various tasks, including automated digital forensics, digital supply chain management, and procurement processes. By adopting AWS services, the company aims to optimize their internal workflows and enhance their digital capabilities.
6 benefits of cloud computing in banking
Fraud detection
Financial industry fraud encompasses identity theft, loan applications with false names, direct fund theft, fake bank accounts, money laundering, attempted tax evasion, and speculative trading.
To combat these illicit activities, banks and financial institutions utilize cloud technology for fraud detection. By analyzing vast amounts of data from various sources, they can promptly identify potentially suspicious or harmful behavior and take action to prevent any harm.
Reduced costs
Cloud computing allows financial institutions to cut data storage costs through a pay-as-you-go pricing model, avoiding hefty upfront expenses for on-premise systems.
With cloud providers handling data storage administration and maintenance, your organization can also save on equipment, IT infrastructure, and staffing expenses.
Tightened security
Banks must safeguard highly sensitive customer data as per legal requirements. While on-site electronic data storage is an option, it demands a skilled IT team with expertise in data security to ensure customer information remains protected.
On the other hand, cloud providers adhere to stringent data privacy and security standards, offering a secure storage method with multiple layers of protection against cyber-attacks and data breaches, guaranteeing the safety of your customers’ data.
Compliance with regulations
Cloud computing enhances compliance with regulations in the financial industry. Given the sensitivity of customer data, there are various data, security, and privacy laws to adhere to.
By partnering with cloud storage providers that follow stringent requirements for data privacy and security, your financial institution can rest assured that it remains compliant with industry regulations, providing peace of mind.
Customer relationship management (CRM)
Cloud computing enhances customer relationship management (CRM) for banks. By utilizing cloud-based CRM systems, they can efficiently store and manage customer data and interactions in one centralized location.
In today’s world customers expect companies to comprehend their individual needs, desires, and expectations. Embracing the right cloud strategies empowers banks to offer personalized services and offerings that meet and exceed customer expectations.
Greater scalability
Cloud computing offers enhanced scalability for financial services. Unlike the past when organizations had to invest in infrastructure for peak loads, cloud services provide flexibility for banks and financial institutions to scale up or down as required.
During peak times or seasonal spikes, your financial institution can automatically adjust its computing capacity to meet demand fluctuations. This optimization of operations prevents resource over-allocation and ensures efficient utilization of resources.
Adoption to cloud in banking
Cloud deployment models
Various cloud deployment models exist to cater to different business requirements and stages of readiness. Banks, like many other large enterprises, often have legacy systems running on on-premise data centers, which can make the transition to the cloud more challenging.
Private clouds
This is the most preferred mode for banks where a third party manages & governs the cloud in-house preferably in the banks premises. Such a model works from within the enterprise’s firewall and ensures greater flexibility, security and control.
Public clouds
This is the most economical model where public resources and infrastructure owned by large cloud companies are shared alongside other clients. This is not a very likely resource banks and financial institutions will opt for unless cost or fast integration of applications is the driving factor. Moreover, often government regulatory bodies pass compliances barring banks from sharing data on public cloud.
Hybrid clouds
They take the best of both the solutions. While the system is deployed on a private cloud, scaling happens with the help of public cloud. This type of cloud finds implementation in specific use cases only.
Cloud service models
There are majorly four types of cloud deployment models that exists to match the needs of banking ecosystems:
Business Process-as-a-Service (BPaaS)
This process looks into small business operations like billing, payroll and human resources.
Software-as-a-Service (SaaS)
This service leverages cloud based software solutions for various mission critical processes like accounting & invoicing, customer relationship management, service desk management, and content management. In this model end-to-end processes and data are completely handled by the cloud service provider while banks focus on their core non IT functionalities.
Platform-as-a-Service (PaaS)
This service model leverages the use of certain cloud platforms for managing the data while leaving a lot of operational processes under the hands of the bank and financial institutions. This model is preferred by banks using custom apps or more control over the sharing of data. It typically includes database development, web server, operating system, interface & software & hardware tools for hosting cloud-enabled enterprise apps.
Infrastructure-as-a-Service (IaaS)
This is a cloud server provider managed IT infrastructure comprising servers, data center and networking resources. They come as VMs on shared hardware or dedicated physical servers for better secrecy. The model is pay-as-you-go and apart from the infrastructure everything lies under the control of the bank or physical institution. This outsourced model is a scalable money saving solution for rapidly growing banks.
Cloud operating models
Choosing the appropriate cloud operating model is crucial for banks and enterprises to effectively leverage cloud technology and drive business growth. Each operating model comes with its own benefits and considerations. Here’s a summary of the three types of cloud operating models:
Virtual captive
The virtual captive model involves establishing a dedicated pool of cloud experts or centers within the organization. These experts focus on cloud operations, management, and support. This approach provides the benefits of in-house expertise without completely outsourcing the cloud operations. It allows the bank to have better control over its cloud environment, security, and data management, while still benefiting from specialized knowledge and support.
Leverage skilled talent
Banks can achieve cloud proficiency by hiring experienced professionals with the right cloud skills directly from cloud service providers. This operating model enables banks to access top-tier talent with specific expertise in cloud technologies. By employing skilled cloud resources, banks can accelerate their cloud adoption and transformation efforts, leading to improved efficiency and innovation.
Outsourcing vendors
The outsourcing vendor model involves partnering with third-party vendors who manage cloud operations, services, and facilities on behalf of the bank. This approach allows banks to leverage the resources and investments of specialized vendors, resulting in cost savings and access to a broader range of services. The vendor’s expertise can be applied to serve multiple banks, providing a scalable and efficient solution.
Selecting the right cloud operating model depends on factors such as the bank’s existing capabilities, budget, risk appetite, and strategic objectives. Each model offers distinct advantages, and banks may choose to combine elements from different models to create a hybrid approach that suits their unique requirements.A well-designed and implemented cloud operating model can enhance operational efficiency, accelerate innovation, and enable banks to deliver better services to their customers.
Conclusion
Cloud banking solutions range from application modernization to infrastructure migration. The perfect solution should be able to offer a secure ecosystem to handle sensitive data while ensuring continuous delivery of information. They should ensure scalability of computing resources at a flexible and transparent price and encourage banks to become self-reliant to orchestrate new services.
