Cloud Computing has significantly gained popularity in the world of IT. However, several sectors such as the banking sector have gleaned the benefits of cloud computing to their advantage as well.
Financial institutions have been striving to serve their clients better and offer stellar customer service. Hence, most organisations have deployed new-age technology for optimising customer experiences as well as overall costs. By incorporating cloud-driven services, they have streamlined data collection and processing from multiple sources.
The recent Gartner report in 2022 says that 70% of global financial institutions have adopted cloud-based investment and banking leading to an increase in overall cloud spend. In this article, you will learn in detail about the importance of the cloud in the enhancement of business transformation of banking, how they operate and the prospects it holds.
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How Cloud Computing is Applied in Banking
Cloud computing is a well-sought-after service that offers access to resources, storage or applications shared via the Internet. It enables banking institutions to store and process data in remote servers instead of local systems. Cloud computing offers various benefits to banking institutions including enhanced security, processing speeds, and optimised costs.
While the financial industry has been slow to adopt new technology due to concerns related to data privacy and regulatory compliance, it has quite steadily warmed up to the idea of implementing cloud computing to optimise performance and meet business objectives.
How Banks Use Cloud Computing
Financial institutions tend to avail of services provided by external providers to manage and maintain their clouds and outsource products. However, Gartner’s 2021 survey has indicated that more and more banks are investing in internal IT teams to keep cloud activities strictly within the company. For instance, many institutions have established private clouds where they host computing resources on a network that only one organisation uses and can be accessed within their own data centre.
Cloud computing is used in banks for a variety of purposes, including:
- Fraud Detection: Cloud systems are extensively used by banks to detect and prevent suspicious activity and fraudulence by analysing large volumes of data extracted from numerous sources.
- CRM (Customer Relationship Management): Cloud-based CRM systems are used by banks for efficient data management and monitoring of customer interactions irrespective of location and time. It is important for financial service providers to have the best cloud strategies to offer services customised to fit customer needs.
- Data Analysis: Cloud financing is widely used for advanced analytics. It helps keep track of patterns and trends related to customer behaviour. By gaining insight into customers' interactions with financial products and services, banks are able to come up with successful strategies and offerings suited to the needs of their clients.
6 Benefits of Using Cloud Technologies in the Banking Sector
Some of the most important benefits of using cloud-driven financial and banking services have been listed below:-
- Enhanced customer experience: Cloud-based financial services provide customers with a better and more reliable banking experience since they offer access to their services anytime and anywhere.
- Optimised costs: With the help of the cloud, banks can cut down on added costs by transferring all their data and applications into the cloud. Public cloud systems usually have a pay-as-you-go pricing model which is highly convenient and affordable.
- Faster processing and operating speeds: Users of cloud-based systems can enjoy fast performance and good operational efficiency because they are designed to do so. They are built to manage and process large data volumes in a fraction of the time spent parsing through them manually. Banks can hence improve their speeds of transaction processing and avoid latency problems.
- Enhanced security: Public cloud systems offer a safe and secure environment, unlike on-premises systems. With multiple layers of protection, cloud-driven banking systems can easily safeguard themselves against data breaches and various attacks.
- Better scalability: Cloud platforms are flexible and can be scaled up or down as per the requirement. This gives banking institutions the ability to serve their customers in the best way possible.
- Regulation compliance: Cloud platforms help financial institutions maintain compliance with the latest regulations related to the financial industry.
Challenges that Come With Cloud Computing in the Banking Industry
Despite the numerous benefits that finance-based institutes can reap from cloud technology, it is no stranger to challenges. Cloud adoption has become a steady phenomenon in the finance sector which has also caused it to lag behind different industries. Some of the primary problems faced by financial institutions after cloud adoption are as follows:-
- Privacy and security of data: Data security and privacy are of utmost importance for financial institutes. Banks need to stringently maintain the safety of data and ensure that it is secure while being stored in the public cloud. In addition to this, they have to ensure that their systems adhere to the regulations related to data privacy.
- Regulatory compliance: Banks are obligated to adhere to the regulations relevant to the financial industry. Most of them require certain procedures specific to customer data management. Most banks can find it challenging to meet every single requirement when they host their systems in the cloud.
- Loss of control: Although public cloud systems boast security, financial institutions still run the risk of losing a part of their control when they move their data to the cloud.
Although the financial industry has taken quite some time to adapt to new tech, studies have shown that they are steadily doing so to streamline customer service and enhance the experience. With cloud computing, they have become more efficient when it comes to serving customer demands.
Public clouds have also been used by financial service firms and the banking sector for quick deployment of applications, ease of maintenance and upgrades, and overcoming multiple issues. With more and more innovations being integrated into this field, a significant amount of opportunities have opened up for potential candidates. However, to become a fintech expert, you will need to have in-depth knowledge about its inner workings and applications. A professional Fintech certification course from Imarticus can help you kickstart your journey in your career.