Cloud Gaining Traction in the Financial Services Industry

Jan 20, 2022
3 min read

Capital One surprised technology and business analysts by shutting down its physical data centres and moving them all to Amazon Web Services. Even at that time, it was highly unlikely that Capital One would be the last major bank to make the transition to an all-cloud IT environment.

The cloud offers lower costs and greater scalability, which are attracting more and more financial services firms. A wide range of resources can be spun up elastically and run at scale, allowing financial services firms to develop better digital offerings and customer engagements, as well as keep pace with growing customer bases.

Cloud adoption also enhances productivity, attracts talent, and provides security. While most financial services organizations have remained on the sidelines for many years, they are finally recognizing the cloud's benefits.

As a result, they accept cloud computing more readily, have seen its successful deployment in the financial services industry, and are becoming more adept at managing risk as well as leveraging it.

Banks have moved ahead with plans for digital transformation to provide a more interactive user experience in response to the pandemic. Banks are migrating applications to the cloud, preferably using cloud-ready apps.

Cloud mainframe emulators exist, but they don't match up to software developed specifically for the cloud. Banks should view moving to the cloud as an opportunity to upgrade technology.

Customers are finding that analytics on-prem and processing data is becoming increasingly challenging. Some financial firms have created huge data lakes to circumvent product silos. The data can quickly become swamped if there is no common taxonomy. A cloud-based solution can facilitate these processes.

Use Cases

Several financial services firms are exploring cloud technology to implement innovative new services and practices. Connecting to third-party apps, for instance, is likely to result in new customers and revenue.

The payment process for ridesharing services has historically relied on connecting passengers' peer-to-peer payment apps or debit cards. This kind of connectivity and then the ability to use fintech apps require the cloud.

The cloud is being used to host complicated technologies such as data marketplace and data warehouses. Organizations can create a consistent data delivery strategy quickly by leveraging this technology.

Additionally, the cloud allows firms to test new apps and online services more cost-effectively, as well as reduce their costs by eliminating the need for on-premises equipment.

On the other hand, you can expect banks to expand into new markets and compete in ways they couldn't imagine before, boosting their revenue and scaling up at previously unimaginable rates.

Answers to critical business questions are urgently needed by financial services firms. The answers might not be ready for business the next day if a firm even ran a nightly job to answer daily questions before cloud computing. Despite this, this scenario happens more frequently than you might think, and the delay in getting the required information can have serious financial consequences.

AI and Machine Learning

Also, a large amount of interest is being shown in the use of fast and large-scale databases for machine learning. With the emergence of AI and machine learning, cloud computing has also shown great promise, including automated loan processing and fraud mitigation chatbots for customer service, a field where cloud computing provides great value because it turns unstructured data into structured data.

As the mortgage industry grows, clients are increasingly turning to the cloud for AI solutions and document management for servicing and mortgage origination.

Cloud-based data storage can make it easier for investment professionals and data scientists to work efficiently and get access to fast and scalable data storage.

On the other hand, the cloud gives financial service firms an opportunity to update ageing systems without investing in costly capital projects. Several of the payment systems in use today are quite archaic and are still being modernized rapidly.

With cloud-native applications, adopters have access to the latest technology and talent, which enables them to rebuild transaction processing systems that can handle very high volumes with low latency. By moving their platforms to the cloud, they become leaner and more agile.

Many use cases are no longer off-limits to the cloud as they used to be.

In the cloud, even core banking has found a home. Yet, controlling and protecting sensitive data is still a major concern that may impede a move to cloud management and control. Fintech firms are embracing both private and public clouds. While cloud service providers developed their security and compliance offerings and increased transparency, the private cloud was the natural progression from traditional server-based infrastructure. Because of the diverse array of cloud-native services now available on the public cloud, plus the associated compliance and resiliency, the public cloud offers a compelling value proposition.

Takeaway

Some of the world's most guarded organizations are financial services firms, mostly due to stringent regulations and the security threats they face as global economy players. Despite these challenges, financial services firms have demonstrated that it is possible to benefit from all the benefits of public cloud infrastructure and still remain highly compliant and secure.

Last but not least, a lot of retail banking innovation is now taking place in the cloud. Fintech companies of the new generation are primarily cloud-based. If you choose to only play on-prem, you will miss out on the cutting edge.