Public cloud adoption in the financial services industry has been reasonably slower because of regulatory disagreements, risk aversion, or entrenched legacy technology. Hence, most banking applications in the cloud today tend not to be crucial to operations. However, that’s changing now. Public cloud services are becoming immensely attractive to financial institutions.
Do banks use the public cloud? For everyone asking this question, this article highlights banking and how modern tech advancements impact the evaluations of the banking ecosystem management; security, risk, compliance, and strategic operations management.
Consider the following factors regarding the deployment of cloud infrastructure as a delivery mechanism for banking services:
Cloud Adoption in the Banking Industry
The ongoing cloud computing developments have established the cloud as a dominant computing paradigm within financial institutions, including banks. The implemented structural changes have critical impacts on modern banking processes, personnel interactions, and technology use.
Banking industry practices developed rapidly, with consumers’ shifting expectations, rising technological breakthroughs, and strengthening business models. The technical development has given the banking industry a deep incentive to implement effective digital strategies that help establish a solid foundation for financial services.
Do Banks Use Public Cloud?
Cloud adoption helps financial institutions efficiently outsource computing resources to refocus resources on faster innovation led by real-time insight effectively. Large financial institutions, including banks, are growing to explore public cloud use cases.
The financial tech developments are driving banks to migrate some central banking platforms and other crucial economic systems into the public cloud.
Public cloud adoption in the banking sector and other financial services has the potential to experience steady growth over the coming years. The pandemic has only helped speed up cloud adoption.
Key considerations regarding cloud adoption in banking include:
Security, Risk, and Compliance
No doubt banks are top targets for cybercriminals. The growing adoption of digital financial services increases security risks faced by banks, and there is an excellent need for high-security standards.
The ongoing COVID-19 pandemic has exposed some crucial risks regarding economic uncertainty, including intensified fraud and money laundering crimes. However, effectively coordinating risk and compliance management functions enables financial institutions to cut down on time spent on internal approvals regarding the deployment of applications into the public cloud.
Hence the first step for financial institutions considering using public cloud services must carefully evaluate the capacity of the service provider to define and monitor security requirements (including ISO 27017, 27001, and 27018 or SOC 1/2/3 attestation). Carefully follow Cloud Security Alliance (CSA) guidelines.
Key security features driving banking in the public cloud include:
- Current trust and verification procedures help enhance identity verification. Banks can leverage this technology to build security into cloud operating models.
- DevSecOps deployment services enable institutions to embed effective application security measures throughout the application-building process.
- Banking institutions can leverage the services of public cloud platform providers and their capacity to deliver risk and support regulatory management requirements.
- Public cloud services provide customized infrastructure to meet the specified needs of a particular industry. Cloud services developed like this provide parameters that strengthen the security of financial institutions.
To effectively address risk and compliance issues, the public cloud enhances operations, regulatory, and other forms of risk management across multiple departments and business functions.
Financial Ecosystem Development
Shifting to the public cloud may require changing the allocation of internal resources to help manage cloud vendors. Financial institutions such as banks are pretty familiar with the large ecosystems of software vendors, IT services, and other on-premise environments.
You can manage cloud services and processes internally or outsource the task to a trusted cloud provider. Robust ecosystem management can boost implementation speed and enhance value delivery to customers.
Key activities driving ecosystem management include:
- Upholding defined security criteria
- Training and onboarding new ecosystems partners
- Recording operational metrics for higher system visibility and technical management
- Defining a cloud strategy by service type (SaaS, PaaS, or IaaS)
- Managing data integrity throughout operations and cloud migration
- API integrations help facilitate the modern development of applications. At the same time, developer talent and efforts focus on advancing development goals.
Customer experience is now a crucial area of competition across many industries. Modern innovative cloud-native applications can seamlessly enhance the front-end user experience. Other customer-focused benefits come from the development lifecycle, such as faster time to market new products/enhancements or application resiliency.
Operations and Strategy
The best way to define economic drivers regarding the public cloud is to consider cost optimization. Banking in the public cloud can help redirect costs to reduce inefficient IT spending and focus resources toward innovations and cloud cost optimization.
Operational and strategic initiatives provide incentives to promote cloud adoption. The cost, especially, is a crucial consideration.
Migrating on-premise workloads to the public cloud enhances agility when responding to market demands. Financial institutions can now deploy cloud-native solutions to improve organizational and technological adaptability significantly.
Cloud computing in banking propels productive developments regarding internal staff experiences, business processes, and human resource management. Businesses can seamlessly create agility that supports cloud-based innovation within the organization’s structure.
Key features driving cloud adoption in banking include:
- Cloud technology empowers financial organizations to optimize internal resources and prioritize projects and workloads to enhance digital transformation projects and staff re-skilling opportunities.
- By outsourcing hardware and software to the public cloud, businesses can improve overall operational efficiency.
- Public cloud outsourcing of financial applications can immensely reduce technical debt, including the implied costs of additional work resources. But, note that migrating to the public cloud may take time. Also, consider the operational efficiencies and the dynamic, discretionary projects facilitated by the system to make up for the transition costs.
- Cloud computing adds a significant amount of future-proofing capabilities for financial institutions and banking facilities alike. To prepare them for constant adaptation to change.
Key Takeaway
Public cloud services may not be the solution for every challenge financial institutions face. However, the benefits provided stand out significantly when compared to traditional IT deployment infrastructure.
Examples include high scalability, agility, high infrastructure, and cost-efficiency. Faster market outreach, security, and resiliency also come into play.