Cloud computing has been a popular IT tool in businesses ranging from retail to real estate for years. However, when it comes to a full stratospheric migration, the financial sector has been a bit of a laggard.
Since the technology’s infancy, banks have been using cloud infrastructure for specific functions. But, on the other hand, many institutions have traditionally relied on outdated systems to handle core transaction processing and other mission-critical operations.
However, with the Covid-19 pandemic upending how banks and other financial institutions had to conduct business, that may alter shortly.
Cloud Computing and Banking Sector
IT teams are hesitant to adopt cloud-based banking due to regulatory limits and uncertainties fully. In addition, the use of the public cloud—platforms controlled by third-party providers such as Amazon, Google, or Microsoft and accessible over the internet—has previously prompted worries about anything from data theft to monitoring to compliance challenges.
Many IT decision-makers are putting their qualms aside as the Covid-19 issue has put enormous pressure on banks to become more tech-centric. Financial institutions’ digital transition was expedited by the necessity for bank staff to work from home and the growing customer demand for online services. The cloud has a whole new attraction now that these trends need massive volumes of data-heavy tasks.
Banks’ willingness to take risks when it comes to cloud adoption looks to be paying off so far. Others who had already invested in cloud technology before the pandemic fared better than those who were forced to change their operational models on the fly.
Several banks turned to cloud technology to keep internal operations running smoothly in the aftermath of pandemic-related branch and corporate headquarters closures.
For some, this required completely changing their business models to allow workers to work from home in a secure setting. According to consultancy firm PwC, only 29% of financial services organizations had 60% or more of their personnel working from home at least once a week before the pandemic.
Following Covid-19, 69 percent of financial services businesses anticipate at least three-fifths of their workers working from home at least once each week. As a result, companies can continue to serve consumers during the tumultuous early days of the epidemic in March and April 2020 by using the cloud to support remote work.
Cloud technology is frequently assumed to be more cost-effective than physical infrastructure, one of its main draws. Customers can provision storage and deploy apps without going through an external service provider with some cloud platforms. A cloud is also a compelling option for storing data and gaining access to advanced applications, such as those based on AI and machine learning (AI/ML).
Cloud computing may have also aided banks in providing more nimble resources to consumers looking for government-backed loans. Proponents of the cloud believe that this is a prime example of how the cloud’s flexibility may enable financial institutions to promptly process vast numbers of transactions, even when the volume of requests increases dramatically.
How is the banking sector benefiting from cloud computing?
Cloud computing solutions have acted as drivers for digital and mobile banking transformation, bringing benefits to both front-end and back-end operational models. These advantages will help financial institutions become more future-proof while also laying the groundwork for increased client value and income.
● Increased Customer Insights
Advanced analytics is required to unlock the insights contained in customer data. Real-time data analysis can lay the groundwork for a level of personalization and proactive engagement across all channels that is impossible to achieve with legacy technology. For example, with immediate analysis, a bank or credit union can better understand individual client behavior and take the appropriate actions to boost conversion, engagement, and loyalty.
● Improved Efficiency
Many financial institutions face challenges in streamlining, automating, and connecting back-office activities that affect consumer experiences. Cloud technology can connect numerous data and operational systems that are now separated and inefficient. This can free up time for more productive and meaningful analysis and decision-making instead of searching for information. Be Prepared: Cloud-based infrastructure can assist financial businesses in quickly reacting to market shifts.
● Enhanced Innovation
Financial institutions can use cloud technology to shorten product deployment cycles and simplify product testing, allowing them to test new ideas in real-time and respond rapidly to market approval (or rejection). Cloud solutions also enable open banking, broadening the available options to customers across traditional and non-traditional financial services.
● Greater Agility
For banks and credit unions seeking more business agility, cloud technology allows them to quickly change market conditions by harnessing data and applied analytics to improve customer experience and operational productivity. The possibilities are numerous, ranging from adapting to changing markets or competitive dynamics to allowing for the scalability of technology use.
● Reduced Data and Continuity Risk
What has once been deemed a flaw in cloud computing has now become one of its greatest assets. Cloud computing is a viable replacement for out-of-date systems that are becoming increasingly sensitive to data tampering. Cloud solutions can provide further comfort from cybersecurity concerns by quickly detecting potential breaches and inbuilt protection to protect banking data. In addition, cloud solutions can help disaster recovery by providing high levels of redundancy and backup.
The unusual events of 2020 appear to have tipped the scales in favor of banks and financial institutions adopting a cloud-centric strategy. Cloud investment has expanded dramatically in recent years, according to Accenture, and it is expected to grow at a rate of roughly 15% until 2022.
Furthermore, given the obstacles of the previous year, banks that have been using the cloud for specialized operations may now be able to implement a more mature cloud strategy on a shorter schedule than previously envisaged. Consumers, who rely more on digital services than in-branch contacts, will profit from these improvements. Cloud computing offers the potential to enable speedier transactions, faster payment processing, custom-tailored services, and a more seamless banking experience.
Concerns regarding cloud technology’s long-term cybersecurity, compliance, and competitive separation remain. This is especially true as banks experiment with new cloud solutions for which they have had little time to plan. As data-intensive applications fuelled by artificial intelligence and machine learning acquire and retain vast amounts of sensitive user data—and as cloud-savvy fin-techs progressively disrupt the existing quo—it will undoubtedly continue to be a topic of discussion.
Banks need to meet customers where they are—behind screens, on smartphones, and even in the cloud in today’s hyperconnected world.
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