Last Updated on March 25, 2022
The rise of cloud-based software has offered companies from all sectors a number of benefits. Even for personal use, platforms like Google Drive or Dropbox have become highly popular. Using software from any device, either via a native app or a browser from any location is a seamless act now. Among all the major sectors, the banking industry has been one of the most beneficial ones due to cloud technology. In this article, we will understand what is cloud computing and scopes & impact of cloud technology on Banking & FinTech domain.
What is Cloud Computing?
Cloud computing, in short, “Cloud storage”, is a new technology for storing the data over the internet. It’s a hybrid technology of computing various services like servers, software, networking, storage, databases, analytics and many more over the internet.
Simply put, cloud computing is the delivery of computing services—servers, storage, databases, networking, software, analytics, and moreover the Internet (“the cloud”). Companies offering these computing services are called cloud providers and typically charge for cloud computing services based on usage, similar to how you are billed for water or electricity at home. Cloud services are delivered on-demand via the internet with pay-as-you-go pricing.
Cloud computing has become a one-stop solution for all the problems related to any kind of information. In the case of banking and Finance, sector cloud computing made many things easier like interoperability, secure storage, 24×7 uptime, etc. This advancement in IT sector led to many drastic changes in a way of treating information. Instead of using a traditional way of storing the info many new techniques like big data, machine learning & AI, IoT came into the picture to store and operate the information directly through the internet.
As per Forbes, cloud computing is expected to grow from $67B in 2015 to $162B in 2020 securing a compound annual growth rate (CAGR) of 19%.
Types of Cloud Computing
Cloud computing has three main types that are commonly referred to as Infrastructure as a Service (IaaS), Platform as a Service (PaaS), and Software as a Service (SaaS). These are sometimes called the cloud computing stack because they build on top of one another.
Software as a Service (SaaS)
Software-as-a-service (SaaS) is a method for delivering software applications over the Internet, on demand and typically on a subscription basis. SaaS provides you with a completed product that is run and managed by the service provider. In most cases, people referring to Software as a Service are referring to end-user applications. SaaS licenses are typically provided through a pay-as-you-go model or on-demand.
A common example of a SaaS application is a web-based email where you can send and receive email without having to manage feature additions to the email product or maintaining the servers and operating systems that the email program is running on.
Accounting, enterprise resource planning (ERP), customer relationship management (CRM), human resource management, invoicing, service desk management and content management software can be delivered using this model.
Infrastructure as a Service (IaaS)
IaaS is the basic building blocks for cloud IT and typically provide access to networking features, computers (virtual or on dedicated hardware), and data storage space. With IaaS, you rent IT infrastructure—servers and virtual machines (VMs), storage, networks, operating systems through IP-based connectivity as part of an on-demand service.
Platform as a Service (PaaS)
PaaS is the cloud computing services that supply an on-demand environment for developing, testing, delivering and managing software applications. PaaS removes the need for organizations to manage the underlying infrastructure (usually hardware and operating systems) and allow you to focus on the deployment and management of your applications.
Among the three layers of cloud-based computing, PaaS is considered the most complex. PaaS shares some similarities with SaaS. The major difference being that instead of delivering software online, it is actually a platform for creating software that is delivered via the internet.
Scope of Cloud Computing on Banking & FinTech
Cloud computing creates an opportunity for bankers to connect with their users directly. Digital services maintain customer relations anywhere and anytime through cloud computing. With the help of the internet, many services like storing, managing and accessing the information have become easier for both the bankers and the consumers. Cloud computing is an easy technique to deploy and integrate with all the services of the bank system which decreases the time and effort of the user.
The evolution of cloud computing enabled the banks to focus more on the customer-centric model and digitalizing the trading & wealth. Cloud computing creates a multi-channel relationship with the customers at every aspect of the service. It helps in storing, backup and recovering huge data of the company. Not only the storing of the data, various other services like delivering the software, transferring the data, Updating and recovering of data is very easy through cloud computing technology. Cloud computing also increases the turnover of the banks by integrating cost-effective cloud solutions.
The banking industry needs to address the ever-growing data input demands. There is a need to explore the systems that do not rely on like-system migration so that infrastructure can be modified without any disruption. Banks have been slow in adopting cloud computing as there are apprehensions regarding reliability, regulatory and security risks. But slowly, cloud computing is changing the way consumers interact with banks.
FinTech maintains the substantial growth and sustains the growth constantly, courtesy cloud technology. FinTech reduces the CAPEX and OPEX budgets, increase the service portfolio and the user experience. The most important aspect of cloud computing is reducing the risk factors related to the data center and its infrastructure. The confidential data will be completely secured. It also helps in risk analysis of the business so that the main focus will be on business rather than securing the crucial information.
Some of the big names in the FinTech cloud computing sector are:
- Amazon Web Services
- Google Virtual Cloud
- Microsoft Azure
- IBM Bluemix
Applications of Cloud Technology in Banking & FinTech
- Cloud computing increases the efficiency in the industry. Usage of cloud technology is an added advantage in banking and finance sector. Digitalizing the services will allow the banks and financial institutions to build up an infrastructure to provide the best and appropriate service to the customers.
- Data centers generally go through many attacks from the hackers which corrupt and led to the loss of very crucial information in the bank. Such attacks can be eliminated by authenticating the data centers which are very easy through cloud computing. Every data stored is safe with hybrid cloud computing technology.
- Amazon web services and Microsoft’s Azure are cloud providers who provide hybrid cloud computing servers to the companies. Getting the hybrid cloud computing servers provides end-end protection to the information stored in the cloud. Cloud computing ensures Confidentiality, Integrity, and Availability of the information over the internet.
- Cloud computing ensures secure transactions and smooth customer experience in banks. Hosting over the internet with the help of web apps ensures better speed and service to the users.
- Payment Gateways, digital wallets, online fund transfer, and secure online payments are among the best examples of the cloud computing service. Cloud ensures the secure and unified customer experience. Updating the payments is quite very easy through cloud computing.
- Enterprise Resource Planning (ERP) and Customer Relationship (CRM) software are the most popular software of cloud computing. This software’s allows the banks and financial institutions to secure the data and also provide the better support to the customers. This software also enables the remote accessing of the information by the users.
Other few cloud computing services in the financial sectors are:
- Insurance Data Exchange Cloud Service
- Financial Services Revenue Management and Billing Cloud Service
- Insurance Revenue Management and Billing Cloud Service
- Financial Services Lending and Leasing Cloud Service
- Banking Cloud Service
- Health Insurance Value-Based Payment Cloud Service
Benefits of Cloud Computing in Banking & FinTech
Cloud computing reduces all the capital expense of buying and setting up hardware and software at data centers. This makes the banks to focus more on banking functions.
Cloud computing services enable easy use of the data. A large amount of data in banks is feasible to use. Cloud computing helps the banking and financial services to manage the different demands in the banking world.
Cloud infrastructure is highly reliable. Cloud computing gives a complete data backup to information. Data can also be accessed at multiple redundant sites with utmost ease. Hybrid cloud models give the utmost security to the data. The data saved in the cloud is encrypted well to eliminate all kinds of security threats in banks.
Cloud computing eliminates all the unnecessary time of racking and stacking of data in the banks, hence increases the productivity. Every task in the bank related to the information will be taken care of by the software through cloud computing.
Every technology has its own pros and cons, while in case of cloud computing limitations can be considered as precautions. These precautions need to be taken care by the bankers who enable high ended and secure service to the users.
Security in the cloud servers is considered to be the main issue. Maintaining the confidentiality and security of financial information of customers and internal company data is very important in banking and finance institutions. If proper precautions are not taken by the vendors then entire confidential data will get corrupted. This could be avoided by encrypting the cloud service and storage of confidential information in private storage can help in managing the risk.
Acknowledgment: This article has been co-authored by Parinita Gupta, a banking professional & digital marketing expert.