Cloud Computing in Financial Services: Key Drivers and Benefits

The financial services industry is transforming at a lightning speed, with shifting consumer expectations, emerging technologies, and new regulatory requirements.

In the wake of COVID-19, financial institutions understand more than ever the need for agility and adaptability. When the COVID-19 crisis erupted, many financial services firms that had planned to roll out digital business models gradually were pushed to do it all at once. Many of those who did were amazed by the relative ease they transitioned to cloud operating models.

The need for cloud computing in the financial services industry

Cloud computing is rapidly changing the way financial organizations think about how they use their IT resources. Traditionally, banks have been hesitant to adopt the technology, mainly due to security concerns. There were other difficulties too, like regulation and the complexity and procurement costs of managing a large number of vendors.

Banks are looking more closely at the advantages of a cloud-based strategy . Cloud can facilitate business agility and rapid evolution. The on-demand innovation it offers can meet expanding business needs while maintaining security without IT transformation's historic investment burden.?

The global finance cloud market was valued at $23.67 billion in 2020, and is projected to reach $90.11 billion by 2030, growing at a CAGR of 12.4% from 2021 to 2030 -

Allied Market Research

As per Google, 83% of financial services companies report deploying cloud technology as part of their primary computing infrastructures. The most popular cloud architecture is hybrid cloud (38%), followed by single cloud (28%) and multicloud (17%).

Cloud adoption in financial services

The cost of installing, managing, and maintaining in-house data centers, servers, and systems will continue to rise. Cloud migration would offer a cost-effective and secure option. Financial institutions are speeding up their migration to cloud technologies in order to become future-ready and integrate with emerging FinTech ecosystems.?

The key drivers:

? Dynamic toolkit to build innovative solutions

? Cloud-native technologies to execute ongoing releases

? AI, ML & process automation for a better customer experience

? Flexibility to expand to integrate more apps and databases

? Ability to optimize products and services swiftly & securely

? Connected data sets facilitating deeper insights

? Increased resilience to physical outages and service interruptions

Benefits of cloud computing in financial services

After emphasizing the cloud's potential as a less expensive, faster, and more "elastic" alternative to on-premise data storage, financial industry leaders are looking at how they can leverage it in the following seven areas. Financial institutions may be able to increase their business performance and shareholder returns by implementing cloud technology in these seven areas.

1. Synchronize the business

● Better integration of business units through data exchange, integrated decision-making, and faster resolution of customer issues.

● Creating shared, connected data sets; enabling deeper, advanced insights and analytics; improving collaboration through new shared platforms and tools; and speeding up decision-making.

2. Get better access

● Customers were already migrating away from visiting their bank branch before the pandemic in favor of banking digitally 24/7 via their computer or smartphone application and the internet.

● The cloud provides anytime, anywhere access to work for employees, as well as to accounts and bank representatives for consumers, in an era when many people work from home, including bank employees.

3. Drive business transformation

● Using machine learning, Internet of Things platforms, augmented reality and virtual reality, image identification, natural language processing, and other tools to help innovate and drive strategy to create new consumer experiences, create and promote offers, improve operations, and manage people.

4. Boost resilient operations

● Enhance company-wide resilience to respond more swiftly to physical outages, interruptions, etc.

● Moving away from a single data center or region but gaining the ability to replicate data and app services across several data centers or regions.?

5. Minimize the risk

● Risk mitigation is always a major task with financial institutions. Legacy technology's capacity to detect and mitigate new risks may be limited in terms of security. Security is a primary focus for leading cloud providers, and it is even part of their business model. They invest significantly in infrastructure and continue to improve and maintain that infrastructure to provide the greatest level of security.

● The cloud's scalability allows it to scan thousands of transactions per second, which improves compliance. And this can help a financial institution's know-your-customer/anti-money laundering (KYC/AML) compliance in detecting fraud and money laundering.?

6. Improve IT security

● Cloud providers follow stringent security protocols and have a proven track record. Environments can be as secure as or more secure than on-premises environments.

7. Adjust computing costs as needed

● Helping organizations with IT budgeting, moving away from large upfront capital expenditures.

● Companies can respond more quickly to industry trends or changes in financial priorities.

● Capture cost efficiencies in dynamic cloud pricing by adjusting computing capacity as needed.?

With rapidly changing consumer expectations, technological advancements, and alternative business models, financial institutions must begin planning today to help them prepare for the future.

Embracing the cloud is vital for successful digital finance transformation. Moving to the cloud can help financial institutions improve operational resiliency, employee productivity, regulatory compliance, and business model innovation.