Cloud is more than just a technology buzzword. It is now a major catalyst for enterprise business transformation, especially a potential game-changer for how BFSI organizations will operate in the future.
Cloud adoption in the banking sector
Prior to the COVID-19 epidemic, approximately 91 % of banks and other financial institutions were utilizing or planning to use the cloud . In the last three to five years, companies in the global financial services industry have embarked on a public cloud journey, which accelerated notably in the previous 12–18 months.
According to a new Gartner analysis, application modernization is the most widely cited objective in banking and investing services . In the report, 70% of banking leaders expect their cloud spending to increase in 2022. Such statistics showed how banks and credit unions increasingly turn to cloud computing solutions to store data and adopt applied analytics to meet their capacity and speed requirements.
The expected returns would be increased customer insights, improved efficiency, and cost-effective innovation:
- Increased Customer Insights: Customer data contains insights that can only be unlocked with advanced cloud analytics. The results of real-time data analysis can provide the foundation for customer personalization and proactive engagement across all channels - which was impossible with legacy infrastructure.
- Enhanced Efficiency: Intending to smoothen customer experience, financial institutions struggle to streamline, automate, and link back-office activities to front-end activities. Cloud technology can connect and integrate numerous data and operational systems, promoting higher accessibility as staff can access data readily without being chained to any local network. This can speed up their process for more productive analysis and meaningful decision-making.
- Drives Innovation: Financial institutions can use cloud technology to shorten product deployment cycles and simplify product testing. This allows them to test new ideas in real-time and respond rapidly to the market's demands. Another transformation born from cloud solutions is open banking, a consumer-approved method of giving a third-party organization access to their bank's financial data. This hybrid cloud implementation could help broaden customer options across traditional and non-traditional financial services.
A new wave of innovation
While most banks currently rely on external service providers, Gartner’s 2021 survey indicates a future shift of cloud activities being owned by internal IT teams . Companies have begun to set up private clouds and establish their own data centers. Some use cases of cloud computing include:
CRM: Banks opt to utilize cloud-based CRM solutions to manage client data and interactions. The system enables financial firms to track all consumer contacts, regardless of where or when they occur. Cloud CRM allows to collect, analyze and utilize customer-associated information and update the systems, thereby offering superior customer service. Particularly in the current context of a digital-forward society, a virtually comprehensive CRM could assist businesses in keeping up with the fast-pacing market demands, and consecutively tailor solutions for better customer experience.
Fraud detection: Cloud's framework enables BFSI organizations to automate regulatory reports with regulatory strategy and incident handling. In addition, cloud infrastructure provides a more secured environment than legacy systems due to its up-to-date nature. This safety-ensured ecosystem is maintained specifically with three main cloud security solutions: infrastructure security, operations security, and application security. These solutions together aid financial institutions in detecting suspicious activity before it exerts any negative impact.
Improving CX: Every touchpoint of the customer journey counts for financial service providers that rely on real-time data and must conduct transactions as quickly as possible (e.g. stock trading applications). Banks can build new solutions that better fulfil clients' demands by analyzing how they engage with financial goods. An advanced digital messaging and communications strategy through cloud computing could create a robust data flywheel for financial institutions. It deepens their customers' insights, makes better data-driven decisions, and strengthens customer engagement.
Future on the Cloud
According to a Google Cloud and the Harris Poll poll, 83% of financial service executives said their companies used cloud technologies in some capacity . However, a majority (38%) choose hybrid cloud solutions, with lower percentages opting for single-cloud and multi-cloud options. For many banks, a hybrid strategy works best because it enables them to benefit from both the flexibility and scalability of the public cloud and the protection and control of the private cloud. For instance, banks can address security and data privacy concerns by constructing a hybrid cloud where crucial data is kept in a private cloud, and computational power is housed in the public cloud.
The best method for financial institutions to deal with potentially listed cloud challenges is to ensure that their IT infrastructure complies with applicable data privacy and security standards. They must also have solid risk management procedures in place to promptly detect and respond to any possible hazards.