Innovation is driving competition in the financial sector, and the industry’s technology leaders are taking advantage of all the advantages cloud technology has to offer
Retail banks have responded to the sudden and considerable customer service challenges brought on by the pandemic with excellence and efficiency. Many banks rapidly develop and execute rapid customer migrations to remote services, such as online and app-based banking. This development is very important to the banking industry because it shows what banks can really achieve technologically when they have to respond to market demands. The clear benefits of cloud computing for banks show how they can continue this impressive digital advance.
Innovation is driving competition in the financial sector, and the industry’s technology leaders are taking advantage of all the advantages cloud technology has to offer. As a result, these organizations can take advantage of important advantages unique to cloud technology. In addition, there is an imminent risk of delaying cloud migration.
While banks are understandably concerned about the security, control, and compliance implications of migrating to the cloud, the downsides and risks of ignoring action are too great, and given the large-scale foray, could even pose a long-term existential threat as competitors grow Digitizing.
4 Benefits of Cloud Computing for Banks
Cloud technology can provide banks with operational excellence and overall business performance in a number of ways that cannot be ignored.
1. Greatly improve the running speed
Banks have the ability to capture and store vast amounts of customer data every day. The problem is that with traditional approaches like data storage silos, banks are severely limited, if at all, in how this data is used and connected. Silos are completely inefficient and not suitable for modern customer experience requirements. Furthermore, it hinders timely and accurate regulatory reporting.
Cloud technology can centralize the process of data capture, storage and interpretation. It can also reduce costs associated with these critical processes and generate richer, more precise, and faster data-driven insights that banks can leverage to improve performance.
2. Enhance data security
Cloud service providers continuously and comprehensively analyze and review their products for any signs of security breaches and provide updates when and where necessary. Furthermore, cloud technology is based on data and designed for a data-centric world. It is a modern and future-proof solution for an increasingly digital business environment.
As a result, its security credentials have exceeded what the on-site infrastructure can usually provide. Additionally, cloud security continues to evolve rapidly, and it is a reasonable assumption to expect it to improve further over time.
3. Unprecedented customer insight
The modern banking industry is more competitive than ever, with challenger banks and fintech companies specializing in specific financial verticals providing stiff competition for traditional financial institutions. Regulations such as PSD2 have further contributed to this level of intense competition and have also forced traditional banks to improve themselves in terms of competitiveness. As a result, banks face unprecedented competition from other traditional banks as well as from the still thriving alternative finance industry in the form of fintech and challenger banks.
One of the key foundations driving this competition is the exponential growth of data and the use of cloud technologies to generate fine-grained, detailed, and rich customer insights. Customers were already demanding more of the kind of financial services they expected before 2020, but the pandemic has taken it to another level. In short, if banks fail to meet customer expectations, customers — especially Gen Z and millennials — will look elsewhere for financial service providers.
To meet this demand, banks will need to make greater use of cloud-based, data-efficient services in their operations. Proactive banks have taken steps to identify manual and suboptimal processes in their operations and business models, which cloud technology can easily upgrade.
4. Significant cost reduction
By switching to cloud technology, on-site infrastructure maintenance, security patch updates, and storage are no longer required. That means banks either don’t need teams of staff to provide this kind of specialized maintenance, or they can redeploy those staff to focus on other urgent business areas.
Another important factor contributing to cost reduction is that cloud service offerings can expand or shrink based on bank requirements. In this way, banks only pay for what they need.
Risks to banks of delayed cloud integration
As mentioned earlier, banks are understandably hesitant to fully embrace cloud technology due to a range of factors. It may indicate the complexity of adapting legacy systems to cloud computing, or in some cases, legacy technologies must be replaced entirely. The cloud may still be risky for some banks due to its previous reputation as a possible security risk. However, cloud security has come a long way and it is now widely regarded as the gold standard for data security.
In addition to these concerns, adopting any substantial new technology means having to implement a change management process, which is no mean feat. It requires sustained effort, careful planning and strong execution. In short, rolling out a new technology is a daunting task for any organization, but even more so for banks – often large organisations. However, the onus is on banks to drive this change.
The risks of delaying large-scale infrastructure migration to the cloud are numerous. It allows competitors to improve their own operations and take advantage of the benefits the cloud can bring, such as the ability to drive better customer engagement. Regulators are increasingly demanding digital capabilities, evident in newer frameworks such as MiFiD II and PSD2. The cloud can improve compliance and please regulators.
When it comes to cloud technology, banks have access to market benchmarks in data security. Relying on legacy on-site infrastructure, even with security updates, can create higher security risks. In addition to these possible risks, the cloud can enable banks to significantly reduce their infrastructure and data processing costs. Much of the future of banking will be in the cloud. The question for banks now is, do they want to be a leader in cloud technology or a laggard?