What is cloud banking and why every financial institution should adopt it?
Cloud banking is an approach that fully utilizes cloud technology for core banking systems, account/product maintenance, customer services, digital banking & many other related functions. Financial Service Providers (FSPs) across various regions use cloud-based architectures for their day-to-day operations. This model enables FSPs to quickly respond to customer needs without sacrificing quality, reliability, or security. Cloud technology is an essential technological element in today’s fast-paced financial services industry. In simple terms, cloud computing is the practice of using a remote network of servers (of a 3rd party service provider) to store, manage and process data instead of using & maintaining a dedicated in-house server or PCs. Migrating into a proper cloud-based platform will determine the future of your financial institution.
As of today, many financial institutions are compelled to invest a significant amount of capital and human resources to run their own data processing centers. This is a huge deviation from a bank’s core business, which is to provide financial products and services for their customers. This costly and counterproductive approach creates more problems rather than solving them. The higher cost of providing financial services has caused a decline in revenues and consequently, higher banking fees to their customers. In legacy banking systems, the in-house IT professionals are more focused on fixing break downs which is a mundane task.
Another reason why banks are unwilling to adopt a cloud-based approach is security concerns. Customers place high trust in financial institutions with their financial data. The consequence of a data breach can have severe legal, financial, and reputational ramifications. To find solutions to these issues we must examine what cloud computing can offer to a financial institution.
A cloud-based platform could reduce costs significantly as opposed to legacy on-premises server hardware’. As a result, more resources could be allocated to the bank’s core business by diverting technology capital towards improving customer centric digital technology. Therefore, a bank could reach further and lower its fees to remain competitive. If the day-to-day operations are non-value-adding work that deviates from the mission of the organization, there is little room left for innovation in an industry that is experiencing huge technological shifts.
Do cloud systems lack security? Most data breaches occur by in-house systems. The idea that cloud-based systems are not as safe as on-premises systems is a common misconception in the banking industry. Cloud systems use complex algorithms to encrypt and protect data. While no system can guarantee 100% security, reliable cloud platform vendors such as Microsoft’s Azure, AWS, and Google Cloud Platform offer the finest security as per today’s industry standards. Cloud systems can also protect against loss of data due to computer viruses, hardware issues, and power failures. When selecting a cloud-based platform make sure that you choose a reliable service provider. Mika Kavis of Forbes indicate that “Most progressive enterprises are knowledgeable about all of the different cloud service models (IaaS, PaaS, and SaaS), have researched the major vendors, have started executing on their cloud strategy”. “Using cloud services means that your data is better protected than if most of us tried to manage it on our own... Large-scale services are all much better than we are at avoiding data loss from gear failure, keeping software up to date, upgrading hardware, and constantly improving security.” says Frank Gillett, Forrester Research.
As a leader and innovator in the APAC Fintech industry, FINAP Worldwide has partnered with Microsoft Azure to offer one of the best cloud-native Core Banking Systems in the world – ‘ECOru’ Banking & Finance Solution. ECOru is an open API, scalable, and highly parameterized digital core banking system built to empower small to more complex financial institutions & banks. Designed by industry specialists in accordance with international standards, ECOru offers businesses the opportunity to create new distribution channels, innovative products, cost-effective service delivery, and provide a better customer experience.