segment-pixel
For the best experience, try the new Microsoft Edge browser recommended by Microsoft (version 87 or above) or switch to another browser � Google Chrome / Firefox / Safari
OK
brand-elementsbrand-elementsbrand-elementsbrand-elementsbrand-elementsbrand-elements
brand-elementsbrand-elements

Cloud computing is accelerating the evolution of the banking industry. It is quickly becoming a critical factor driving innovation, cost management, and customer experience as banks compete in an increasingly digital environment.

A survey conducted by IDC and Microsoft found that 80% of bank executives believe that cloud computing in the banking sector is essential to their digital transformation efforts. This points to the fact that banks are looking positively at the cloud to boost their operations while considering their data integrity, safety, and governance standards. With its help, banks can offer faster, more efficient, and secure services to customers.

In this article, we will be exploring the scope of the cloud in the banking sector and what it can mean for the future of the banks.

The Role of Cloud in Connected Banking

Cloud computing is a key part of connected banking, which is a group of banking products and services that work together to give customers a smooth experience. It gives an ecosystem the scalability, flexibility, and data analytics tools it needs to work.

Cloud platforms and services can integrate with other digital channels, such as mobile and online banking, to provide customers with access to banking services from anywhere, at any time. Cloud-based data analytics tools enable banks to collect and analyze customer data from various channels. This data is the foundation for the business intelligence necessary to drive better business decisions.

Why are banking leaders paying attention to the cloud?

One of the key reasons why banks want to leverage the cloud, albeit in limited capacity, is to stay competitive against FinTechs capitalizing on innovation and agility. To ensure that they do not fall behind, banks must explore the possibilities that the cloud offers.

Let us look at why banking leaders are taking keen interest in cloud:

  • Risk Management: Cloud computing provides banks with access to advanced analytics and modeling tools that enable them to improve their risk management strategies. By leveraging these cloud-based tools, they can gain a better understanding of the risks they face and develop effective risk management.
  • Regulatory Compliance: Cloud computing offers banks improved compliance with regulations and industry standards through cloud-based security and compliance tools. These tools help banks maintain compliance with regulations, such as GDPR and PCI-DSS, and ensure that sensitive data is protected. Cloud-based automation and analytics tools further improve compliance by enabling faster and more efficient compliance reporting.
  • Data Management: Cloud computing can provide better data management capabilities, including improved data storage, processing, and analysis. They can leverage cloud-based data management tools to improve their risk management practices and datafication to ensure the best data-based business decisions are made.
  • Scalability: Banks that experience periods of high demand, such as during peak trading times or when launching new products can quickly and easily scale their IT resources up or down as needed with cloud computing.
  • CapEx-OpEx Savings: With cloud, banks can avoid the upfront costs spent on purchasing and maintaining hardware and software, as well as the existing expenses of managing and upgrading their IT systems.
  • Flexibility: It is easier to experiment with new technologies and business models by using cloud-based services. Rapid testing and deployment of new applications and services without investing in expensive infrastructure upfront wins cloud computing brownie points.
  • Customer Experience: Banks can offer faster and efficient service delivery through cloud-based applications and services to their customers. They can also personalize the services through data analysis and insights obtained from cloud-based tools. For example, a bank could use cloud-based machine learning algorithms to detect and prevent fraudulent transactions in real-time, reducing the risk of financial losses and enhancing security for customers.
  • Collaboration: The collaboration among teams and departments within banks can be improved through cloud-based collaboration tools and platforms. This collaboration can also be with third-party providers and partners so the banks can offer a broader range of services to customers.

Why Hasn’t Cloud Reached its Full Potential in the Banking Sector?

Cloud computing, like any other technology, has inherent problems and restrictions in adoption that banks must evaluate before making any decisions. This could be a major reason for the banking industry's delayed embrace of cloud computing.

  • Security Risks: One of the biggest challenges in adopting the cloud for banks is ensuring the security and compliance of their sensitive data. Cloud providers must have adequate security measures in place and should be compliant with regulations and industry standards to protect customer data from cyber threats across different attack surfaces.
  • Data Ownership and Control: Banks must also consider the issue of data ownership and control when using cloud services. They must retain ownership of their data and have control over how it is accessed, used, and managed to genuinely maintain their data stewardship.
  • Integration Concerns: Many banks have legacy systems that are not compatible with cloud services, making it challenging to integrate cloud-based platforms and services. Banks must carefully evaluate their existing systems and determine the best approach to integrating with cloud services.
  • Budgeting: Adopting cloud can be costly, and banks must carefully evaluate the costs associated with migrating to cloud services and ongoing maintenance and support. The benefits of cloud adoption must outweigh the costs and they must get a good return on their investment.

What’s in Store for Cloud in Banking?

Cloud presents promising possibilities for the banking sector. Here are the factors that can influence the future of cloud in banking:

  • Open Banking: Open banking is when APIs are used to share data and services about money with third parties. Most of the time, third parties give bank customers technology, a service, or an app that uses shared financial data and services. The shared financial data includes things like bank customers' statements and records of transactions. Cloud technology will be a very important part of integrating open banking with businesses and people.
  • Core Banking Modernization: For a long time now, financial institutions have been aware that they must replace their aging on-premises core banking software with a cloud-based alternative. It hasn't been picked up by banks yet because of the costs that have already been spent, the risk of moving, and a fearful mindset. As cloud services get better and make it easier and safer for banks to switch, the cost equation changes in cloud's favor.
  • Cloud-native Technology: With cloud-native technology, banks can make it easier to create and manage APIs without having to worry about the underlying infrastructure. They can also use runtimes that support APIs to enforce policies without getting in the way. Apart from traditional banks, neobanks such as Tonik, are also relying on cloud-native technology for mission critical banking platforms, AI-powered chatbots, data analytics, and real time fraud detection to orchestrate a digital disruption.
  • Increased focus on cloud security and compliance in banking: There is already an increased focus on security and compliance to ensure that sensitive customer data is protected. Data privacy, protection, and compliance with regulatory requirements are the priorities that help banks weigh their options while moving any of their operations to the cloud.
  • Mobile-first approach: Customers can access banking services from anywhere and anytime through their phones. Cloud computing provides the agility and flexibility needed to develop and deploy mobile banking applications that offer a seamless and personalized user experience so this approach will drive the cloud transformation in banking.
  • Increased use of AI and ML: Leverage the power of artificial intelligence (AI) and machine learning (ML) to analyze large data sets and gain valuable insights into customer behavior, preferences, and needs can help banks to elevate their customer-first ideology. They can also automate tasks, reduce errors, and enhance decision-making processes with AI and ML. Cloud plays important role in providing high compute to run these ML model and shut it down post usages.
  • Hybrid cloud environments: Banks are increasingly adopting hybrid cloud environments, where they can combine the benefits of public and private cloud services. Hybrid cloud environments are scalable and flexible like public cloud services but can be controlled through private cloud services.
  • Partnerships between banks and cloud providers: Cloud providers and banks are forming partnerships to develop and deploy innovative banking solutions that leverage the power of cloud computing. These partnerships enable banks to access the expertise and resources of cloud providers and offer customers cutting-edge banking services and products.

Key Takeaway

Cloud computing will have a constructive role to play in the digital transformation journey of banks. Connected banking is the future of the banking sector catalyzed by cloud computing. The right set of data privacy guidelines from government can help banks adopt cloud.

Get Started

arrow arrow
vector_white_1
Think Tomorrow
With Xoriant
triangle triangle triangle triangle triangle
Is your digital roadmap adaptive to Generative AI, Hyper cloud, and Intelligent Automation?
Are your people optimally leveraging AI, cloud apps, and analytics to drive enterprise future states?
Which legacy challenge worries you most when accelerating digital and adopting new products?

Your Information

6 + 2 =
Solve this simple math problem and enter the result. E.g. for 1+3, enter 4.

Your Information

4 + 2 =
Solve this simple math problem and enter the result. E.g. for 1+3, enter 4.

Your Information

6 + 11 =
Solve this simple math problem and enter the result. E.g. for 1+3, enter 4.