Cloud Computing in Banking Industry: Benefits, Use Cases and More

Since the inception of cloud computing, we’ve several organizations from the banking world incrementally migrating to the cloud. With the amount of data produced & consumed increasing exponentially, banks are increasingly leveraging cloud services. It helps them to address the need for speed & capacity while centralizing data storage and supporting real-time analytics.

If you, too, are considering cloud services but aren’t sure how the different deployment & operating models fit into your digitalization strategy, then this blog is for you.

Here Is What We’ll Cover:  

• Need for Cloud Computing in Banking Industry
• Benefits Of Cloud Computing in the Banking Sector
• Applications of Cloud Computing in the Banking Sector
• Cloud Deployment Models
• Cloud Service Models
• Cloud Operating Models
• Challenges Of Cloud Computing in the Banking Industry
• How is Rishabh Software Powering Banks
• FAQ for Cloud Computing in Banking Sector

Cloud services are on-demand services that provide access to shared resources, applications, or storage over the Internet. It enables banking institutions to store & process data in remote servers instead of local systems. While the financial industry has been slow to adopt cloud technology due to concerns about giving up their legacy on-premises applications, regulatory compliance & data privacy issues, this stance is changing rapidly. Today more & more financial institutions realize how technology can help them meet their business objectives while satisfying customers’ needs at the same time.

And, adoption of the cloud isn’t simply about just technology—it’s about a new model of IT ownership. This approach enables banks to innovate faster, become more agile & benefit from unprecedented economies of scale.

In our opinion, an accurate cloud model should:

• Offer a foundation for secure, continuous delivery of content, applications, and services
• Make banks self-reliant to orchestrate new services without the need to deploy software or add new hardware to their infrastructure manually
• Become flexible & transparent with consumption-based pricing—for example, a pay-as-you-go model
• Enable banking at the scale of computing resources up or down as per demand
• Decouple data from applications and make it available for any business process or service that may need to consume it

You may also want to give this insightful post a read to know more about the key drivers and use cases of cloud adoption in financial services

Here’s some insight into cloud adoption by banks:

• By building its cloud, Bank of America has saved $2 billion annually (on annual infrastructure savings). It helped reduce the firm’s servers to 70,000 from 200,000 and its data centers to 23 from 60
• Wells Fargo is leveraging MS Azure as part of its digital transformation focus and has moved strategic business workloads, including data centers, to the cloud
• Goldman Sachs uses Amazon Web Services (AWS) solutions to transform the way it operates internally—from automated digital forensics to digital supply chain and procurement

Cloud technology in banking has emerged as a catalyst for digital transformation, making banks future-ready. Therefore, any bank must be aware of the main benefits of cloud computing to take advantage of its robust deployment and delivery model.

• Faster Processing Speed: Cloud platforms offer fast performance since they can handle large amounts of data quickly and easily. It allows banks to improve their transaction processing speeds and reduce latency problems.
• Centralized Data Repository: Cloud platforms enable seamless integration of disparate business data and operational systems with secure & easy data sharing. It creates centralized and connected data to drive integrated decisions and solve customer problems more quickly.
• Data Security: Apart from secure server configuration, cloud banking platforms are validated to comply with industry legislations and regional & international guidelines mandated by the financial services regulators. These requirements govern information security management & risk management to ensure safe data transfers and avert unauthorized access.
• Disaster Recovery: The most significant benefit of transitioning to the cloud is its robust disaster recovery with integrated redundancies. With the financial world moving at a much faster pace, the cloud allows banks to streamline opportunities, meet customer expectations and operate at the speed of business by regaining access to actionable insights in case of disruptive events or natural disasters.
• Access to Powerful Data Management Capabilities & API Ecosystem: Advanced analytics and cloud API ecosystem allow banks to meet the changing demands of customers with open banking. Banks and financial services can also optimize their reconciling efficiency and cash and liquidity management.
• Improved Customer Experience: With the cloud, banks can offer access to banking services anytime and anywhere, leading to a better customer experience.
• Reduced Costs: The movement of applications and data to the cloud offers massive savings for the bank from a management & maintenance standpoint. Further, the pay-as-you-go pricing model of public clouds enables financial institutions to utilize cloud services effectively.
• Adhering to Regulatory Compliance: Cloud platforms enable banks to manage & meet regulatory compliance requirements in line with financial industry regulations based on the geographies. It would include complying with the international authorities and data protection benchmarks.
• Increased Efficiency: Cloud technology in banking helps financial services organizations to streamline operations with improved efficiency. Payment processes can be further simplified by connecting both buyers and sellers on a shared application. This helps improve transaction speed and easier to track data.
• Business Continuity: Cloud computing can assist banks and financial services firms with increased data protection, fault tolerance, and disaster recovery for financial firms. It provides a high level of redundancy and backup at a comparatively lower price than traditional managed solutions.
• Agility and Transformation: Financial organizations can experience shorter development cycles for new products through flexible cloud-based operating models. The related technology supports a faster and more efficient response to the needs of modern banking customers. It enables businesses to shift non-critical services, including maintenance, software patches and other computing issues. This helps financial firms focus more on business growth.

Cloud services provide easy access to storage, apps, and shared resources enabling banks to analyze data in remote servers with faster processing speeds and enhanced security. Here’s how banks can harness the potential of cloud services to achieve their business goals while meeting customer needs simultaneously:

• Fraud Detection & Prevention: Banks use cloud services to integrate fraud detection capabilities into their banking system. It enables them to analyze massive amounts of data from several sources and detect suspicious activity in real-time to prevent bank fraud.
• Data Analysis: Banks use cloud-based analytics platforms to extract insights into customer segments, needs, patterns, and trends. Real-time data analysis lays the foundation for personalization and active engagement across touchpoints, which is impossible with legacy infrastructure. With instant access to deeper insights, banks can better understand customer pain points and buying behavior to build loyalty and drive conversions. Banks use cloud-based analytics platforms, like Microsoft Azure & Amazon AWS, to extract insights into customer segments, needs, patterns, and trends. With instant access to deeper insights, banks can better understand customer pain points and buying behavior to build loyalty and drive conversions.
• Customer Relationship Management (CRM): Cloud-based CRM systems enable banks to manage customer data and interactions. They allow financial institutions to keep track of all customer interactions, regardless of location or time of day. And with the right cloud strategy, banks can truly offer personalized service based on customer needs and preferences.

Banks using legacy systems running on an on-premise data center may find it daunting to modernize and migrate to the cloud. Fortunately, they can take an incremental approach if they don’t want to opt for an all-in-one cloud model. Banks can use a mix of hybrid and multi-cloud solutions based on their business needs, readiness, and maturity.

• Private clouds: Managed & governed by a third party that works in-house or the bank itself. Banks usually prefer private clouds for hosting their services as it ensures greater flexibility, security & control as it is deployed within the enterprise’s firewall.
• Public clouds: This IT model is easily accessible to the banking sector for owning, managing & sharing cloud services. Banks looking for economies of scale can opt for the public cloud.
• Hybrid clouds: Comprises the best from private and public cloud services environments that can be used separately for specific use cases. This model enables standard data management for both private and public clouds. It allows deploying the system on a private cloud while scaling with the help of a public cloud whenever needed.

The key to seamless cloud deployment & integration lies in implementing a suitable model that matches the needs of banking ecosystems. Here are four main types of cloud services that banks can choose from:

• Business Process-as-a-Service (BPaaS) – This model is used for standard business operations such as billing, payroll and human resources.
• Software-as-a-Service (SaaS): This cloud service consists of mission-critical business software and its corresponding data that end-users can access on their web browsers. The systems hosted on SaaS solutions include accounting & invoicing, customer relationship management, content management, and service desk management.
• Platform-as-a-Service (PaaS): This service delivery model offers a comprehensive development and deployment environment. It typically includes database development, web server, operating system, interface & software & hardware tools for hosting cloud-enabled enterprise apps. PaaS helps streamline the development, maintenance, and support of custom apps.
• Infrastructure-as-a-Service (IaaS): This cloud service model allows banks to use virtualized computing resources, including software, servers, and data centers, on an outsourced model instead of purchasing them.

Choosing a suitable delivery model with the required mix of resources and assets is vital. Rishabh Software works with global customers across the listed three operating models:

• Virtual Captive: This model provides a dedicated pool of experts or centers to help with cloud operations and meet demand. It is an excellent alternative to an absolute outsourcing approach.
• Leverage Skilled Talent: Banks can achieve cloud proficiency by employing experienced people with the right skills from cloud service providers. This operating model allows banks to hire the best resources for their unique business needs and unleash new ways of working.
• Outsourcing Vendors: In this operating model, offshore centers, facilities, and resources from third-party vendors manage operations. It blends resources and investments to cater to the services of multiple banks.

Getting your operating model right is the key to driving business growth. Our specialists can assist you in designing and building your cloud infrastructure.

Despite the numerous benefits of cloud computing technology, many banking organizations are still hesitant to adopt it. Here are some of the reasons that prevent banks from adopting cloud with potential solutions:

Security

The main concern for banks investing in cloud services is ensuring data security. When sensitive banking data is stored and processed by a third-party provider, banks lack visibility into authentication issues, credentials are compromised & there is a risk of data breaches.
Fortunately, popular cloud providers have optimized their security capabilities. Ensure your chosen cloud service provider implements a robust identity management system with reliable access control measures. Cloud also ensures the implementation of data privacy protocols and database security.

Performance

When business data and apps are moved to the cloud, the business performance becomes dependent on the cloud platform.
So before investing in cloud technology, banks should look for cloud service vendors with emerging technologies. The performance of BI tools and other cloud-based solutions is linked to the vendor’s systems. This makes it vital to ensure the provider has protocols to mitigate real-time issues.

High Availability

Banking systems need to remain up and running at all times. So banks relying on third-party services and cloud systems must be reliable and robust to avoid frequent outages and unwanted downtime.
Banks can leverage third-party tools to track service efficiency and have a reliable plan to monitor SLAs, usage, performance, robustness & business reliance on cloud services.

Compliance

Certain banking regulators require that customer banking data remain restricted to the home country. This sensitive data should not be intermixed with other information residing on shared databases.
Banks must select the right service provider and clearly understand where their data will reside in the cloud and the deployment & operating models employed to address compliance and security concerns.

We serve the banking services industry by taking a customer-first approach to everything we do. As a cloud application development company, we provide development, reengineering & integration services to support financial organizations. We help integrate the best-suited cloud transformation strategies. Our team approaches to cloud migration module-wise while reducing transition risks and enabling them to witness the many advantages of cloud computing. As an experienced FinTech software development company, we can help you build robust cloud banking solutions ranging from simple mobile apps to complex enterprise-grade software.

Success Story: Cloud-Based Mobile Money Transfer Solution

A European digital services company serving banking & financial services was pursuing a cloud services partner to develop an all-inclusive money transfer platform. Their end customer wanted to build a money transaction platform that simplifies currency distribution to its global users. And further, it should be scalable and meets the international compliance norms for fraud detection, tax evasion & anti-money laundering.

Take a glance at this case study to learn more about our development approach, the technology stack of using Azure and Xamarin, and the value delivered in fund transfers and payment processing.

1. Why is a cloud core attractive proposition for banking institutions?

Listed below are some reasons why the cloud can help reshape the future of the banking industry;

• Moving from closed systems to ecosystems: Banking institutions can make their products and services available through other providers’ channels and offer third-party offerings through their channels.
• Embedded services shift: Banking institutions are looking to connect credit products at the point of search rather than offering credit options after the end of the sale.
• Real-time data acquisition and automatic updates: They help upgrade the experiences for both end-customers and relationship managers.
• Advanced analytics: Help with product selection and promote better service delivery that is intelligent and personalized.
• Zero-trust security model: Includes data encryption in transit and at rest. It comprises multifactor authentication, access monitoring, tokenization and more

2. What is the success parameter for banks while shifting to the cloud?

Listed below are some success factors banks should consider while shifting to cloud solutions.

• Clear ROI definition for the cloud-based projects
• Selection of service providers with a holistic experience in offering cloud-based services
• Go for outsourcing contracts that utilize pay-per-use cloud delivery models
• Understanding of the regulatory & compliance framework with data confidentially requirements

3. According to you, what are the potential risks for banks while migrating to cloud services?

You agree that banks operate with a low regulatory and reputational risk tolerance. As part of this, the risks would include disrupting the business while shifting its code systems to the cloud. Further, they need to comply with stringent data, security, and privacy rules.