Reasons to Implement Cloud Computing in Banking

Cloud computing in the banking sector has become a game-changer for the industry. It is already revolutionizing operations and customer experiences, providing enhanced security and fraud detection tools.

In this article, we will delve into the key reasons why banks should embrace cloud computing, explore the main types of cloud solutions for the financial industry, and address the challenges and considerations that come with cloud adoption.

Benefits of Cloud Computing in the Banking Sector

Cloud technologies provide access to shared resources, applications, or storage over the Internet and allow data to be stored and processed on remote servers instead of local systems. This approach has nuances, but in the case of banking institutions, there are several reasons to prefer it.

• Cloud engineering services can significantly simplify and accelerate the implementation of innovations and improve applications’ flexibility.
• Cloud service providers typically invest in advanced security measures to protect their infrastructure and customer data and can offer quick and agile deployment of cybersecurity. Banks can benefit from robust security protocols, encryption, access controls, and regular security updates, helping to safeguard sensitive financial information.
• Such services can also help banks and financial institutions to standardize their processes and data management.
• Cloud-based solutions offer reliable backup and disaster recovery mechanisms. Banks can store data securely in off-site locations, ensuring business continuity even during natural disasters, system failures, or other disruptions.
• Cloud computing allows banks to scale their operations to meet customer demands quickly. Organizations can easily add or remove computing resources, launch new services, and expand their infrastructure without significant delays or disruptions.
• Cloud service providers often comply with industry-specific regulations and security standards. Banks can leverage these compliant infrastructures to meet regulatory obligations, such as data privacy requirements and financial constraints.
• Cloud platforms can process large amounts of data quickly and easily. This allows banks to increase transaction processing speed, implement fraud detection systems and reduce delay problems.

All this together allows financial institutions to significantly accelerate technological development, gain access to innovation and save money at the same time.

Some stats

According to the GlobalData report, the total global spending by retail banks on cloud computing was more than $38 billion, and the market is expected to achieve a CAGR of more than 22% by 2026.

Some leading banking companies, such as Bank of America, BBVA, and Barclays, are currently deploying cloud computing, and most retail banks already have considerable exposure to cloud infrastructure and are continuing their cloud implementations.

How Cloud Computing is Used in Banks

Cloud computing in banking and financial services can be used for different purposes. Let’s look at the most common options.

• Enterprise synchronization. Convenient data exchange and collaboration tools allow faster and better integration of different business units and synchronization of their work.
• Advanced data analytics. Cloud capabilities are used for advanced analytics to gain insights into financial trends, customer behavior patterns, interactions with banking products, etc. All this is the basis for making decisions and adopting the best development strategy.
• Customer relationship management. Cloud CRM systems are optimal for managing customer data and interacting with clients regardless of time or location. Combined with analytical data, you can create a personalized service experience and meet customer needs faster.
• Fraud detection. Not the most critical issue of banking cybersecurity. The cloud allows you to work with large volumes of data, analyze user behavior, and detect suspicious activity quickly.

Cloud solutions can also be used for partner integrations, improving the functionality of internal programs or client applications, etc.

Find the Best Cloud Computing Model for Financial Services

Сloud computing in the banking sector provides a smooth transition from outdated local systems to more flexible and affordable in terms of operational costs. However, this is only possible if you choose a suitable cloud computing model.

Cloud deployment models

Let’s take a look at three primary options.

Public cloud

It is an accessible and easy-to-use model that enables the management and sharing of cloud services. This is an excellent option for banking institutions for which scale is essential. Such cloud infrastructure belongs to cloud service providers, who offer access to all companies in the banking or other sectors without special requirements.

Statista research shows that the leading companies providing public cloud platforms are  Microsoft Azure, Amazon Web Services, and Google Cloud. Their users are large financial organizations that plan to constantly move their data to the cloud and use cloud applications for their business operations on a global scale.

Private cloud

Private clouds are managed by a third party within the organization or by the bank itself. They provide greater flexibility, enhanced security systems, more opportunities for control, etc., by deploying within the enterprise firewall.

Such cloud models are usually custom and developed particularly for a specific bank. They are deployed within the organization, so the risks of data leakage are much lower.

Hybrid cloud

In this case, we are talking about a combination of private and public clouds (at least one of them), which in most cases, is created for one specific business. It has a single IT ecosystem consisting of multiple environments connected via local area networks (LANs), virtual private networks (VPNs), wide area networks (WANs), or APIs.

Environments can be used separately for specific cases. In addition, the bank can deploy the system in a private cloud and benefit from its advanced security measures while still gaining opportunities to scale with the public cloud.

Cloud operating models

The proper operating model is the one that combines exactly those resources and assets that meet the needs of a specific banking institution. Today we have three main options.

Challenges of Cloud Adoption in Banking

Cloud computing for the banking industry has many challenges, as well as any other tech solution. By addressing them proactively and implementing appropriate strategies, banks can navigate the complexities of cloud adoption.

Legacy system integration

Banks can encounter challenges when integrating their existing legacy systems with cloud-based applications or migrating them to the cloud. They must be compatible with cloud environments and modifications. It is essential to plan the integration carefully and find proper specialists to avoid this issue to maintain data consistency, and seamless connectivity is essential.

Latency and performance challenge

The physical distance between a data center and a cloud service provider can contribute to latency problems. Delays in banking operations can adversely affect system performance, negatively impacting customer experience and satisfaction.

Banks must ensure the availability of reliable internet connectivity, establish failover mechanisms, and have contingency plans to prevent service interruptions and ensure continuous business operations.

Vendor lock-in and data portability

Banks need to consider the potential risk of vendor lock-in when adopting cloud services. It is crucial to assess the portability of data and applications between different cloud providers or back to on-premises environments if required. Banks should implement strategies to ensure data and application portability and minimize the possibility of being locked into a single provider.

Security concerns

Although cloud technologies provide many advanced security tools and measures, paying attention to this challenge is still critical. Storing and processing sensitive banking data with a third-party provider raises visibility issues and the potential for compromised credentials or data breaches.

However, reputable cloud service providers offer robust security capabilities. Banks should ensure that their chosen cloud service provider implements a strong identity management system with reliable access controls, as well as data privacy protocols and database security measures.

Accelerate Your Cloud Journey With devspiration

In capable hands, cloud computing in banking can unlock a lot of benefits, including scalability, cost efficiency, and enhanced agility. Whether you’re looking to optimize your infrastructure, streamline application development, or improve data security, our comprehensive suite of cloud services has got you covered.

At devspiration, we understand the unique challenges and opportunities of migrating to the cloud. Our team is well-versed in cloud architecture, deployment strategies, and best practices.

We will work closely with you to develop a tailored cloud roadmap that aligns with your business objectives and ensures a seamless transition.

Contact us!