Cloud computing and architecture are the holy grail of scalability in the digitalized world that we live in. The extent of benefits that can be derived is practically endless, and so is the limit to continuous improvements for security and accessibility.
Today, digital transformation is a top priority for banks. It covers everything from developing new technologies to creating better customer experiences and improving operational efficiency. In addition, financial institutions need to embrace cloud technology as part of their digital strategies.
Cloud technology is a critical component of the digital economy, and its importance will only grow in the coming years. The rapid adoption of cloud computing services by businesses and individuals means that the financial industry will be compelled to follow suit to remain competitive. However, banks face several challenges when using cloud technology effectively. Chief among these challenges is scalability—how do you scale your operations so they can handle larger amounts of data without increasing headcount significantly?
Cloud-based products help solve this problem by making it easier for companies to scale up as needed. This frees up time on infrastructure management and allows IT teams more time for innovation and experimentation, giving them a competitive edge over traditional models based on physical servers, aka the legacy systems. The pay-as-you-go (PAYG) functionality of the cloud technology is its USP, and the functionality of automation makes for unparalleled smooth sailing. The public clouds are categorized as on-demand utility computing. As per IDC’s 2021 survey, their importance can be gauged by the fact that the forecasted expenditure on setting them up in 2024 is 3.5x the entire IT budgets of financial institutions, typically banks.
The most challenging aspect of building a successful digital offering for the banking sector is finding secure, effective, and efficient ways to scale it. Cloud technology can help them solve this problem by making it easier to scale their resources as their customer base grows.
It’s important to understand that when scaling a product or service, there are two main options: overhauling or outsourcing.
Security is a top concern for banks while engaging Fintech partners, but cloud technology can help solve this problem. Cloud applications are built on security compliance and can also be accessed anywhere, which means they’re more easily accessible by customers and employees alike. According to NTT Data’s research paper on the digital transformation of financial services, 85% of those surveyed believe that retail and tech innovators, in other words—the digital business platforms (DBPs), are pivotal for the quintessential repositioning of the FIs.
By leveraging cloud tech, banks can maintain compliance while still offering new services and products. The interoperability of hybrid cloud models allows banks to perform optimally without the headache of network management. With an interconnected network of automated microservices architecture, financial institutions can have the flexibility to keep up with customer demand in an increasingly mobile world. The focus of allied financial platforms, such as wealth management firms, is split between offering innovative products and impeccable customer experience. Depending on the industry positioning and the larger mission statement, the accessibility features, such as being a financial marketplace, will vary across organizations. This shift is yet to be seen as full-fledged, as a meager 23% of FS&Is are reaping business benefits from DBPs.
Banks need to be able to offer new products quickly and efficiently. Cloud DevOps solutions can help them streamline the development process and eliminate the need for heavy upfront capital expenditures. Banks can also use cloud solutions to enhance their security with data encryption and other advanced security features that protect sensitive customer information.
You must partner with the right vendor when you’re looking to bring new technology into your organization. One of the most important considerations when choosing a vendor is whether or not they have a proven track record. You need to make sure that they have successfully implemented similar solutions in other banks before.
Another major factor when choosing a vendor is whether or not you can have a good relationship with them. Choosing a company that does not work well with its customers may be detrimental to your IT department and the rest of the bank. It will also help if the company has robust security protocols in place and can provide guarantees about compliance with industry regulations. These include GDPR (General Data Protection Regulation), PCI DSS (Payment Card Industry Data Security Standard), PCI 3DS (Three Domain Secure), and other regulatory requirements specific to banking institutions.
As the industry shifts to a digital future, banks are increasingly looking to take advantage of cloud-based technology. Beyond its potential for cost savings and efficiency gains, this approach can also help banks increase their agility and responsiveness to market demands as well as enhance their security posture without sacrificing customer service.
But it’s not just about the benefits; what’s important is that banks make informed decisions about how they want to deploy these solutions for them to be successful.
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