What is cloud-based banking?
Digital banking has become the new norm; be it making online payments, checking transactional data online, or opening digital accounts; everything can be performed online. However, safety and security are one of the biggest concerns for organizations in the financial sector, specifically, Banks where preventing security breaches is one of the biggest challenges.
Banks are gradually moving to cloud computing due to the extensive security and data protection features it offers. Cloud computing has become the new game changer; with the continuous advancements in technologies and changing consumer expectations, cloud banking is moving to the forefront. It has become the new replacement for on-premise data storage; allowing Banks to monitor end-to-end processes. A lot of banks are now starting on the cloud; with no physical presence whereas existing banks are gradually migrating to the cloud as cloud banking is not only cost-effective but also flexible and easy to use.
Why are banks moving to the cloud?
Because everything is on the cloud, banks can easily change their services and offerings; similarly, consumers can easily manage their accounts through digital banking on the cloud. Account holders can use digital banking apps to make transactions, view bank statements, report lost or stolen cards, add beneficiaries, and contact customer service.
Cloud banking gives banks 360-degree visibility into each transaction, ensuring the security and safety of data stored with safe and secure configurations and strict security measures that notify banks of any data security breach. Banks had many security concerns about the cloud in the past, but those concerns have faded as many organizations gradually moved to the cloud and began relying on it for operational processes and data storage.
Banks can transform data and insights to improve all aspects of their business, from customer experiences to operational processes, using cloud solutions and their ability to manage and store large amounts of data. As a result, one of the primary reasons why banks are migrating to the cloud is to adapt to changing consumer behaviors; banks want to change the way they interact with customers. Banks can reach a larger audience through cloud banking, resulting in greater scalability and system control. Furthermore, data in the cloud is accessible from anywhere, on any device, at any time by anyone, providing backup at a significantly reduced cost. Clients can obtain banking services without having to visit branches and wait in long lines as using the cloud for banking speeds up bank processes as well as allows the workforce within the bank to stay connected with each other as everyone has access to the same data on the cloud.
Cloud Banking and its benefits
Cutting costs with Cloud Banking
The initial cost of setting up a cloud-based server may deter organizations, but in the long run, it not only saves you money but also improves your ROI. The cloud enables businesses to accelerate processes, automate tasks, and collect insightful data in a short period of time with no additional workforce required, thereby saving time and money spent on irrelevant or less important tasks.
In the banking industry, a cloud-based server can assist banks in instantly removing services or resources for specific account holders or clients based on their changing needs and requirements. This helps banks control their expenses because additional cloud services or features can be added or removed as needed; users can stop paying for the service immediately.
Transformation of data into valuable insights
Cloud-based systems can help banks transform data into valuable insights with the cloud’s ability to store real-time data, implement tracking tools and create custom reports. With actionable data available, banks have the leverage to analyze and understand changing consumer behaviors and patterns, allowing them to alter services and offerings across all channels based on consumer requirements. This can result in higher conversion rates, and higher customer satisfaction as well as help increase engagement.
Improved efficiency and agility
The cloud-based technology stands out for its efficiency and agility; enabling banks that use cloud banking to adapt to changing consumer behaviors quicker as well as market new products and services soon after the launch. With cloud banking, users have access to new product and service-related information on their devices through digital banking, also allowing banks to save expenditure on additional infrastructure investment.
Enhanced cloud security
One of the major concerns for banks that offer online banking or those that are entirely on the cloud is the cloud’s security; which one cannot afford to have. Protecting the data and assets of thousands of account holders can be very challenging for banks as cyber-attacks are on the rise.
Advancements in cloud technologies have resulted in high-security features; where any attempts of security breaches are instantly identified. Cloud servers have extreme security standards; offering a feasible alternative to banking institutions using outdated systems that can be highly vulnerable to data leakage. However, in order to maintain this security standard, the correct implementation of these security measures is crucial.
Different types of cloud computing:
- Public Cloud: Shared my multiple users (Greater scalability, less system control)
- Private Cloud: Owned by one user (Less scalability, more system control)
- Hybrid Cloud: Uses both public and private cloud (balanced scalability and control)
Banks and their challenges of migrating to the cloud
Migrating your infrastructure to the cloud can be very beneficial for organizations that are using outdated systems, but it does come with some challenges. The process can be complicated because one must first understand their cloud banking infrastructure. Once that is completed, the migration process will be divided into several stages to ensure that data is transferred correctly.
Let’s take a look at some of the critical factors to consider for smooth cloud migration:
- Conduct architectural analysis
- Transfer snapshot of on-premise data
- Replicate and synchronize data as per your business requirement
- Migrating business intelligence and analytics
Cloud migration challenges and risks:
- Lack of planning and strategy
- Lack of cost budgeting
- Disruption of existing systems and operations
- Data security and compliance due to large volumes of data
- Lack of cloud skills
- Cloud sprawl
Cloud Computing in the U.S. Banking Industry
The cloud adoption rate has been on the rise in the United States as a great percentage of businesses have already moved to the cloud whereas others are catching up; it is predicted that in the coming few years most businesses will have moved to the cloud completely. Banks have benefited from the cloud’s great elastic functionalities, i.e. increased scalability, recovery, continuity, and cost-cut downs.
With cloud computing, banks have the leverage to provide exceptional customer experiences through cloud banking apps such as CRM and digital banking; allowing them to deliver new products and services to customers much more quickly. This transformation has already changed the way banking institutions operate in the U.S banking industry; with automated core engineering, security, and risk processes. According to research, more than 60% of Banks have their data stored in cloud-based servers due to the high degree of trust organizations have in this technology.
Bottom line: Is cloud the new future for Banks?
Cloud computing has led to a profound transformation in the way Banks operate today. The technology has been emerging as banking institutions have begun to rely on cloud services for their data sources and operational needs however a small percentage of the banking industry has still not fully embraced this new concept. While the cloud adoption rate is evolving, some concerns regarding security and risk factors have emerged. Some Banks have fears regarding data breaches; as banking institutions have to deal with highly confidential and sensitive customer data, the cost of a data breach outweighs the benefits of implementing a cloud strategy.
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