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7 Things Financial Institutions Must Know About Cloud Banking

March 14, 2024

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7 Things Financial Institutions Must Know About Cloud Banking

To stay competitive and thrive in the evolving financial landscape, banks need to adapt quickly. Cloud banking might be the answer. Here’s why.

Cloud banking allows financial institutions to manage core banking services and systems on the cloud with scalable resources and computing power. This enables banks, credit unions, and other FIs to deliver on-demand services and remain competitive in the rapidly evolving financial landscape. Legacy banking infrastructure and systems are vulnerable to obsolescence as newer and more powerful solutions continue to emerge. So, while the existing systems might be functional, they no longer offer the much-needed edge.

Cloud computing is expected to be one of the fastest-growing technologies in the coming years.

Source: Capgemini

Cloud banking, on the other hand, offers the potential to improve almost every aspect of an FI’s business operations, including driving agility, innovation, and scalability. As customer expectations continue to rise, and FinTechs and neo-banks disrupt the finance sector, the key to offering satisfying banking experiences and future-proofing your FI lies in migrating to the cloud.

Let’s take a deeper dive into cloud banking and why it is the future of finance.

1.   The Next Logical Step for FIs

Banking and capital markets leaders increasingly recognize that cloud is more than a technology; it is a destination for banks and other financial services firms to store data and applications and access advanced software applications via the internet.

Source: Deloitte

By migrating to cloud banking, FIs are better positioned to meet evolving customer demands and expectations. The technological challenges posed by legacy hardware and infrastructure are eliminated, while banks, credit unions, and other FIs gain immediate access to on-demand, scalable computing power to meet customer demand. By being able to simply turn on and off resources, FIs not only gain immense flexibility, but can also focus better on core business needs rather than managing technology stacks

Powering Banks for the Future

2. Lower Operational Costs

With usage-based billing, FIs can turn huge up-front capex into smaller, ongoing operational spend. Each organization can choose the services necessary for their business or even turn them on or off as needed, with a pay-as-you-go model. Plus, there’s no need to make large investments in hardware or software. In addition, with the services and products being hosted on the cloud, performance, and uptime can be maximized, while associated variable and fixed expenditures can be reduced.

2. Business Continuity and Agility

Cloud hosting not only ensures maximum uptime, but the cloud provider also takes care of managing, maintaining, and upgrading the technology, as and when needed. With regular backups and stringent security measures, FIs are also reassured of high fault tolerance and quick and effortless disaster recovery. Moreover, with on-demand availability of resources and computing power, FIs can respond promptly to customer needs. Most importantly, business operations are not disrupted during maintenance, software patches, etc.

3. Enhanced Operational Efficiency

Migrating to the cloud is much more than accessing an advanced solution for processing and storing data. Business operations benefit from improved overall performance because the cloud offers:

  • Better quality control
  • Strengthened loss prevention and disaster recovery
  • Lower operational expenses
  • Optimized risk management.

4. Improved Customer Experience

The first and possibly most important benefit that customers can be offered is anytime, anywhere banking. In addition, data analytics can be easily deployed to personalize customer experiences and journeys, which is a major differentiator for FIs today. Data analytics can also help identify areas of improvement, innovation opportunities, and much more.

5. Stronger Data Protection and Security

Did you know that legacy infrastructure could be limiting your ability to detect and mitigate new vulnerabilities and risks? Cloud technology arms you with the latest and most powerful security tools. The best part is that the cloud provider shares the responsibility for ensuring the highest levels of security by deploying advanced security measures. While the FI is responsible for training employees on following established security protocols, the cloud provider keeps the organization updated on the latest security risks and measures to detect and prevent them.

6. Easier Regulatory Compliance

Not only do the regulatory guidelines vary from one region to another, but regulatory frameworks are also constantly evolving. For an FI to expand to new markets and be a truly global entity, compliance is essential while also being one of the biggest challenges. Cloud solutions can help FIs conduct intraday risk and liquidity calculations, detect fraud, and ensure compliance with varying data storage and privacy laws, and KYC/AMC protocols.

Why Banks are Choosing the Cloud

Choosing the Right Cloud Service Model

Not all cloud service approaches are created the same, nor will all of them equally suit your business. So, check out the 4 service models to make an informed decision.

1.  Software-as-a-Service

SaaS is the most popular cloud service across industries, where business software and tools are delivered via the cloud, and users can access these solutions through a web browser. The most common SaaS solutions include:

  • Enterprise Resource Planning (ERP)
  • Customer Relationship Management (CRM)
  • Human Resources Management System (HRMS)
  • Accounting, payroll management, and invoicing
  • Content management
  • Service desk management

2.  Platform-as-a-Service

With PaaS, you gain access to a platform for interface, application, and database development, testing, and storage. It allows FIs to streamline the development and maintenance of their custom apps, while reducing technology-related costs by minimizing hardware, software, and hosting needs. Support services are also provided by the PaaS vendor.

3. Infrastructure-as-a-Service

What if you no longer needed to invest in servers, data center space, software, or network hardware? This is exactly what you get with IaaS. Rather than buying all of these elements to ensure smooth operations, simply outsource the infrastructure needed from the cloud provider.

4. Business Process-as-a-Service

You can also choose to outsource the typical business operations, such as human resources, payroll, billing, etc. You not only get the technology infrastructure, but also experts to run these operations.

Image source: Deloitte.com

Future-Proofing Banking

With advancing technology, changing customer expectations, and emerging business models, the FI of 2030 will look very different from today. The time to make a strategic shift to power your organization is now. With almost three decades of experience in providing state-of-the-art technology solutions for the finance sector, Opus Technologies can ensure migration to a resilient, reliable, and scalable cloud-based architecture. Talk to the experts to learn how migrating to the cloud need not be disruptive to existing operations.

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