Services
Cloud banking: Why is it necessary?
With the rapid development of the cloud services industry it is only natural that it coming into the banking sector has become a game-changer for the industry. In fact, cloud digital banking solutions are not just just shaking things up: they are already completely revolutionizing operations and customer experience, by providing cutting-edge fraud detection tools and enhanced security. And it’s just a start!
Digital transformation is the name of the game – and banking cloud services are the MVPs. So, what makes cloud for banking so necessary? Well, in simple terms, cloud digital banking solutions are the key to the kingdom of unlocking agility, scalability, and innovation in the financial sector. As all things digital continue to go through all forms of evolutions, traditional banking models are trying to catch them all as banking cloud software promises not only efficiency, but a golden brick road right into a financial services revolution.
What is cloud banking and why are banks moving to the cloud?
Bygone are the days of bank clerks crouching behind the everpiling heaps of paperwork - the cloud has finally come to the deserted fields of banking services and it’s gonna rain all over.
Just like the water can take any shape, cloud computing in banking and financial services can be used for all kinds of purposes. Just take a look at some of them:
Enterprise synchronization
Smooth data exchange and collaboration tools pave the way for quicker and more effective integration of various business units, ensuring seamless synchronization of their operations.
Advanced data analytics
Cloud banking platforms are utilized for complex data analysis in order to get insights into financial trends, consumer behavior patterns, interactions with banking products, and so on. It is the foundation for making decisions and implementing the optimum development strategy.
Customer relationship management
Cloud CRM systems are crucial for managing your customer’s data and interacting with clients regardless of where or when they are. Combined with analytical data, this cloud banking software can create a personalized service experience and meet all needs of your customers fast and easy.
Fraud detection
While not the primary focus of banking cybersecurity, banking cloud plays a crucial role in handling large volumes of data, analyzing user behavior, and swiftly identifying suspicious activities. Cloud digital banking solutions can also enhance the functionality of internal programs or client apps, among other benefits. It's basically like having an extra set of eyes!
Strategizing and enacting cloud solutions
Moving to the cloud for banking isn't a one-size-fits-all journey. It's a carefully thought-out and strategically executed master plan to make your customers banking experience perfectly splendid. Because all this fuss is not just about moving data around – cloud banking is about transforming operations and redefining what a new era of banking encompasses.
When making the transition to the banking cloud, it is essential to have a clearly defined cloud banking strategy, as this will help you avoid stumbling over obstacles and seize new opportunities.
Based on a recent survey conducted by McKinsey, a majority of respondents, including CTOs and leaders in cloud banking software, anticipate that over the next three years, more than 50% of their applications will transition to the public banking cloud.
Even with the increasing adoption of cloud for banking by companies, it's a decision that demands careful consideration. Numerous factors, such as your specific needs, budget, and anticipated benefits, should be taken into account. Crafting a well-thought-out cloud banking strategy is crucial to making an informed choice that aligns with your objectives.
So, as you may already see, when making the transition to the banking cloud, it is crucial to develop a clearly defined cloud banking strategy, as this will help you avoid stumbling over various bottlenecks and seize new opportunities. There are different ways to implement cloud services for banks strategies, and the one you pick should match what your business needs and how much it can grow. As the topic is very vast, we will not be touching everything related to it in this article, but insead take a closer look at four main types of cloud banking strategy.
Single Public
What it means: Getting all your computing, storage, and software needs from one cloud provider that you pay for as you use.
Good for: Businesses wanting to stick with their existing software and infrastructure while focusing on core functions.
Single Private
What it means: Keeping all your data and apps in the cloud exclusively for your business. The tech stuff comes from an on-premise cloud provider's data center.
Ideal for: Organizations prioritizing data security and not keen on taking risks with their data.
Hybrid Cloud
What it means: Mixing features from both public and private clouds. You can keep some applications on-site while moving others to the public cloud.
Good for: Flexibility, letting you balance between on-site and public cloud use.
Multi-Public
What it means: Using more than one cloud service model (like IaaS, PaaS, SaaS) from different cloud providers of the same type (private or public).
Popular because: It provides a smooth cloud experience with options from various providers.
In conclusion, the journey to cloud adoption in banking is far from a one-size-fits-all approach. It requires careful planning and strategic execution to enhance the overall banking experience for customers. But on the bright side, the solutions for picking the right cloud banking strategy are also numerous and offer an array of various advantages.
Benefits of cloud-native development in banking
Just like the sky on a warm July day, in digital banking, not all clouds are the same. Choosing the right kind of cloud banking solution matters.
For banks and credit unions thinking of shifting to a cloud-based system, questions arise. How do I make the most of the move to a cloud-based solution? What type of cloud-based digital banking solution is best?
The simple answer is this: to get the most benefits, go for a fully cloud-native solution. Here's why.
Cost Reductions and Improved Cost Predictability
Legacy and cloud-hybrid IT systems cost a pretty penny for software updates, server maintenance, and hardware upgrades. Cloud-native digital banking, on the other hand, automatically updates and maintains infrastructure, reducing personnel costs.
Stronger Compliance and Security
Compliance and security pose significant challenges in the financial industry's cloud banking transformation. Cloud-native digital banking simplifies data security and compliance by automatically integrating new threats and regulations for seamless protection. Data analytics detect and prevent threats in real time while cloud-native architecture proactively builds updated, real-time compliance and security into the infrastructure.
Enhanced User Experiences
Fintech firms are outpacing traditional financial institutions in growing digitally native user bases. Cloud-native infrastructure makes banks more agile in developing and implementing new cloud digital banking solutions or improving existing ones. It allows banks to simplify services, offering a personalized and smooth experience on one platform.
Development Speed
Legacy and cloud-hybrid systems are slow to evolve with lengthy production cycles. Cloud-native applications enable faster, more flexible development through a fully integrated system. Banks and credit unions gain a significant competitive advantage by developing and launching new products faster and responding rapidly to changing needs of the users.
Unlocking the full benefits of cloud computing in banking requires a cloud-native infrastructure and applications that embrace modern best practices in a digital world.
Challenges of cloud-native banking
Navigating the realm of cloud banking service comes with a set of challenges that are kind of like the obstacles in a video game – you need the right strategy to overcome them. Let’s break them down one by one to understand how they can become blockers in banking cloud services migration.
Sticking to the Rulebook (Compliance):
Banks have rules to follow, and when it comes to storing customer info in the cloud, there's an extra twist. Check the local rulebook – some places want data to stay put. Make sure you're clear on these rules before moving to the cloud to avoid any game-changing consequences.
Guarding the Treasure (Security):
Security is a big deal. Just like banks lock up their vaults, banking cloud data needs protection. When thinking about moving to the cloud, make a solid plan to keep everything safe and sound. Think of it like building a virtual fort with all the right defenses.
Picking the Right Cloud Flavor (Choosing the Model):
There are different banking cloud options – think of them like flavors. There's PaaS, SaaS, IaaS – each with its own perks. Choosing the right one can be a bit like picking the best ice cream. It might seem a little confusing at first, but doing some research ahead of time will help you find the sweetest spot for your bank.
Comparing cloud-based core banking to on-premise software
Ah, we finally reached the age-old debate – cloud-based or on-premise? Welp, let’s weigh in all the pros and cons of cloud services for banks, exploring why cloud-based core banking is gaining traction and how it shines brighter than all on-premise alternatives in this era of digital cloud banking platforms.
Pros:
Agility and Scalability
Cloud-based core banking offers agility, allowing quick deployment of updates and features to adapt to cloud banking service market changes. It also provides scalability, accommodating the growing needs of financial institutions without substantial infrastructure investments.
Cost-Efficiency
The pay-as-you-go model of banking cloud solutions eliminates the need for significant upfront investments in hardware and maintenance, making it a cost-effective choice for banks optimizing their budgets.
Accessibility and Collaboration
Breaking geographical barriers, the cloud banking software enables authorized personnel to access banking services and data from anywhere with an internet connection. This promotes collaboration, enhancing communication and workflows.
Security Measures:
Cloud for banking service providers invest in robust security measures, surpassing individual on-premise solutions. This includes data encryption, multi-factor authentication, and advanced threat detection, ensuring the security of cloud-based core banking.
Cons:
Dependency on Internet Connectivity
Reliance on internet connectivity is a primary drawback. While this issue is now not as critical, occasional outages could impact cloud banking service availability.
Customization Challenges
Banks with highly specialized requirements may face limitations in customization with off-the-shelf cloud services for banks solutions. However, many cloud providers offer configurable options to address this concern.