Banking needs more and more raw power, as well as fast access to data from literally anywhere. Cloud computing is the perfect solution, as it allows for transferring information throughout the Internet in the most efficient way. But why exactly does it meet the banking needs so well and how do customers benefit from it? Answers to these and more questions are waiting for you in our new post!
Cloud banking solutions are not a new idea. It’s not surprising that 95% of banks make use of public cloud services. The reasons are many and we’re going to take a look at the most important ones right away.
Cloud banking solutions versus legacy systems
Obviously, every company wants to optimise the costs and innovate to leverage cutting-edge technologies in order to offer more attractive services. But in order to do it, major changes must be implemented. However, legacy systems, often developed before the emergence of FinTech, in early 2000s or even in 1990s pose some challenges. Most of all, they were usually not constructed with flexibility in mind. Because of this, they cannot be easily upgraded or transformed.
The most important drawbacks of legacy systems that banks’ CTOs name are:
- Inability to innovate fast enough to keep up with the trends
- Limited or problematic flexibility and scalability
- High and rising costs of ownership
- Maintenance and upgrading problems
- Either low security or high costs of maintaining it
Moving the workloads to the cloud solves them all. But the sceptics were not easily convinced that it’s true. For years they were suspicious of keeping data on servers outside of the enterprise. They were just worried about security and regulatory ambiguity. However, as it was proven throughout the years, cloud banking solutions providers know their clients and regulatory environments.
Facts and numbers
Latest reports (for example the one by Accenture) name a number of interesting facts about cloud banking solutions and their adoption rate, as well as point at real-life business benefits. On average, moving applications to the cloud means:
- 10 – 20% operational costs reduction
- 30 – 50% time-to-market reduction
- 40 – 50% provisioning speed increase
Besides these, there are many issues that are hard to measure, but can be observed in practice. For example, business agility, enhanced customer satisfaction, regulatory compliance, cost flexibility. No wonder that an average bank nowadays has about 60% of its workloads in the cloud.
But the data you’ve just seen was collected before COVID. Did the pandemic change anything, though? When almost everything we need to take care of in our lives suddenly has to be done digitally, cloud banking solutions prove to be essential. From just using banking services to working from home offices, cloud computing makes everything much easier than legacy systems.
Types of clouds
There are three approaches towards cloud computing. Before deciding on one, a financial institution must analyse its structures and system to find out which approach looks the most promising. Let’s take a look at the most important qualities of each of them.
- The lowest costs – you only pay for the services you actually need and you don’t buy any hardware or software.
- Very high scalability, as the resources are available on-demand.
- The highest reliability guaranteed by a huge number of servers operated by specialised companies.
- A bit higher level of control which improves privacy and security of sensitive data.
- An option to scale with resources from a public cloud as needed.
- Migration can be done step-by-step, gradually, without overwhelming work needed to be done at once.
- Absolute control over everything, so performance can be optimised in a way that is impossible with other solutions.
- The highest level of regulatory compliance, as the system is created specifically for the client.
- Total configuration management allows for high technological flexibility and customizability.
Real applications of cloud banking solutions
There are six basic applications of cloud based solutions that companies in the banking industry make use of.
Digital and Core Applications (including IaaS, PaaS and SaaS)
Use examples: customer interface solutions that improve engagement: online services such as portals or chatbots; omnichannel access to services.
Big Data Ecosystem and Analytics (includes Machine Learning/AI)
Use examples: better marketing and advertising targeting through cloud analytics, risk modeling and pricing planning, data driven loan modification strategies.
Data Warehouse and Reporting
Use examples: reporting to regulators, clients and business partners, as well as easy access to data at reduced operation costs.
Use examples: safe storage rationalisation for higher security and technology cost reductions.
Data Control and Security
Use examples: virtual workstations allow for work tools cost reductions and make remote work simpler.
Is cloud computing the future of banking?
The quick answer is: yes. At least for now, there isn’t any better way to maintain high flexibility, scalability and updatability. The post-COVID world needs exactly these qualities and cloud banking solutions are mature enough to guarantee them. With extra security as a bonus.