Role of Cloud Computing in Banking and Financial Sector

Cloud computing services are revolutionizing businesses by making manual processes more efficient and simple. By adopting the cloud and building cloud-based mobile apps in banking, the finance industry is witnessing major improvements related to efficiency, costs, and even security.

As reported by MarketsMedia, banks are adopting cloud solutions to gain insights from data, and result in faster innovation. As reported in a survey by IDC, banking executives are also reaping the benefits of cloud deployments by providing better products and services faster to market with greater agility and high security.

Further, let us dive deep into how cloud computing is benefitting the banking and financial sector. Let us also check in brief the underlying challenges of cloud adoption in the industry.

Let’s get started!

Benefits of Cloud Computing for Banking and Financial Sector

With financial industries taking cautious but slow steps in adopting cloud infrastructure, it becomes essential to highlight the benefits of cloud computing in banking.

Enhanced data security

One of the main advantages that cloud computing can offer banks is enhanced data security. Data is backed up in multiple servers, so in case of any hardware malfunction or server cash, banks can easily recover the data.

Also, by storing data in the cloud, banks can benefit from increased levels of compliance. To ensure the intent is perfectly matched, financial industries should choose cloud services that meet the following criteria:

• Migration support
• Access control
• Encryption
• Compliance & certifications

Increased Operational Efficiency

Cloud computing services can help banks to increase operational efficiency by automating processes and reducing the need for manual intervention. This can free up staff to focus on more value-added tasks, such as customer service and innovation.

Cloud computing also enhances easy communication and collaboration between teams all around the world so that work cannot be hampered in any situation at a given point of time.

Improved Customer Experience

Financial institutions can use cloud-based solutions to provide customers with a more personalized experience. Customer data is collected using big data technology. The data contains user insights that can be unlocked with advanced analytics.

And by analyzing this data, financial institutions can carefully understand their audience behavior that can trigger various actions to drive engagement, conversions and build customer loyalty. For instance, TD Bank Group moved to cloud computing to quickly respond to customers’ changing needs.

Access to Software Applications

Cloud computing gives the banking sector access to customer relationship management (CRM) and enterprise resource planning (ERP) software applications that are engineered with the goal of improving client relations, and employee experience. These applications operate in accordance with the SaaS model which means they can have complete control over the data.

Reduced costs

By using cloud-based solutions, banks can save on infrastructure and IT costs. As financial institutions run their own data centers that have large computer servers to process data, payment records, and trading logs. Thus, running these data centers requires a lot of electricity and well-equipped air-conditioned rooms.

So, cloud computing can help financial organizations rent data storage from cloud service providers like Google, Microsoft, or Amazon which have their own data centers situated all around the globe. This results in saving high costs for the financial industry.

Increased Agility and Flexibility

Cloud computing can help banks to increase agility and flexibility. The cloud-based solutions can be easily scaled up or down to meet the changing needs of the business.

In addition, the cloud can be quickly deployed to enhance user experiences by streamlining and implementing new-age technologies like big data analytics, robotics, IoT, artificial intelligence, etc.

However, some challenges still need to be addressed in order to realize the full potential of cloud computing services in the banking sector and maybe a few of the reasons why financial institutions are lagging behind as compared to other industries.

Challenges Faced by Financial Institutions to Adopt Cloud Computing

A few of the blockers that restrict the finance industry from going to a complete cloud computing shift include:

Security concerns

One of the main challenges that the financial industry faces when adopting cloud computing is security. Banks hold a large amount of sensitive customer data, and there are concerns about the security of this data in the cloud.

So when it comes to cloud adoption, banks must ensure that the cloud service providers they are deciding to work with have adequate security measures in place.

Regulatory compliance

Another challenge in adopting cloud computing is regulatory compliance. Banks are subject to strict regulations, and they need to ensure that their cloud-based solutions are compliant with these regulations.

Vendor Lock-in

Another challenge that banks face when adopting cloud computing is vendor lock-in. When a bank chooses a cloud-based solution from a particular vendor, it can be difficult to switch to another vendor as it’s critical to move the entire database if they are already set up in cloud migration.  Also, cyberattacks and data breaches can pose major risks while migrating the data from one vendor to another.

High Costs

One of the major challenges that banks face when adopting cloud computing is high costs. Though cloud-based solutions can be inexpensive, hidden costs involved in them like data outage or degraded data can spike up the overall costs. So, banks need to ensure that they have the budget to implement these solutions.

Wrapping Up

While cloud computing has become more commonplace in the finance industry, concerns over data privacy and security continue to linger. In order to take advantage of cloud services, banks need to develop a clear understanding of how these services can be used to support their business goals.

Additionally, they must work with trusted cloud computing service providers who have a proven track record of delivering secure and reliable cloud services. When done correctly, cloud computing can enable banks to improve their customer experience, drive innovation, and remain competitive in the ever-changing world of finance.

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