The Guide To Cloud Banking

The financial industry accepts all innovative solutions with great enthusiasm as they simplify and speed up all processes. The cloud system was no exception.

Cloud banking allows banks and other financial institutions to complement their current systems and services, monetize corporate information assets, enhance business efficiency, and increase revenue. Cloud solutions for banking service open up new opportunities for financial businesses and clients whose customer experience improves significantly.

In our article, you will learn about the main features of banking, built based on cloud infrastructure. Find out more about standard cloud service models and types of hosting environments, the main benefits, and the challenges of the cloud solution.

What Is Cloud Banking?

The cloud banking solution is an online service for providing hosting computing banking services (data storage, servers, communication, applications, and data analysis) to financial institutions (banks, fintech companies, credit unions, etc.). Basically, it is any banking infrastructure that works in the cloud.

The lack of attachment to physical servers allows financial companies to manage banking platforms and applications via the Internet, which expands their business capabilities. Since the IT department ensures continuous delivery of services, content, and applications, this saves resources and time for other company employees.

How Does A Cloud Banking Platform Work?

The functioning of any cloud banking platform is based on a complex cloud infrastructure produced by such cloud service providers as Google, Microsoft, or Azure. Banks and other financial institutions can access such cloud systems' full functionality for a certain fee.

The operating principle of cloud platforms is elementary. Cloud storage is provided to the user in the required amount, is paid upon use, and eliminates the need to purchase and manage your IT infrastructure for data storage. This offers flexibility, rapid scalability, and reliability. Cloud data storage allows you to host and store a large amount of information, unlike traditional servers and PCs.

Standard Cloud Service Models

The choice of the cloud banking software model for your financial company should be based on its size, budget, and activity characteristics. There are four standard cloud service models:

• BPaaS (Business Process-as-a-Service). This model ensures day-to-day operations such as human resources or billing.
• IaaS (Infrastructure-as-a-Service). This model offers a complete core banking platform infrastructure that manages business operations and software integration.
• SaaS (Software-as-a-Service). This one provides cloud-based banking software for such services as customer relationship management, accounting, invoicing, etc.
• PaaS (Platform-as-a-Service). This model delivers a cloud-based core banking platform for developing a database and banking app.

Types Of Cloud Hosting Environments

In this block, we will consider three types of cloud hosting environments. The choice among them should be dictated by the financial company's current capabilities and future goals, which the right environment will support.

Private Cloud

A private cloud is an environment of cloud computing owned by a single organization (bank or other financial institution). Any cloud service a financial company provides on the private cloud is delivered on a private network. This minimizes the opportunity for attackers to break in and compromise customer data. Moreover, an additional layer of security is added because the private cloud infrastructure is usually located in the owner’s data center. Thus, it is clear that the main advantages of a private cloud are data security and easy control. However, it lacks scalability and flexibility, and being separated from other cloud clients makes it costly.

Public Cloud

A public cloud is a hosting environment in a public domain accessible via the Internet. Famous examples of public clouds are hosted by prominent brands such as Amazon Web Services (AWS), Microsoft Azure, and IBM. The choice of a public cloud for banking services opens upscaling opportunities for financial institutions, since it allows the development of services for which the company subscribes on the cloud. However, maintaining data confidentiality is more difficult here because the environment is divided between multiple users.

Hybrid Cloud

A hybrid cloud combines the benefits of cloud computing from both private and public hosting environments. Today, this technology is growing much faster than other cloud storage formats. Hybrid systems include a range of possible combinations of private and public clouds. For example, a private cloud can be combined with a public cloud, a public cloud with a local infrastructure, or a local infrastructure with a private cloud. Thus, there are quite numerous options for using such technologies. Companies can independently build and modify the systems they need, dynamically distributing tools between different components depending on current needs, tasks, and workload.

Cloud Banking Solutions Vs. On-premise Software

	Cloud-based banking solution	On-premise software
Cost efficiency	Fee for the service. Though, you avoid the costs of maintenance and upgrades.	There is no service fee. However, you need to purchase and maintain the necessary hardware and software. You pay for a trained IT team to manage, maintain, and update the software.
Management and control	A third party provides and maintains the server infrastructure. This frees the financial company from these concerns but also reduces its role in regulating the cloud platform.	Financial companies receive full control over their IT infrastructure, data security, and application functioning. They must independently ensure the functioning of the hardware and software.
Scalability	Cloud hosting is very flexible and allows a financial company to scale quickly, responding to changes in market demand without additional investments.	Local hosting is limited by company resources, making it difficult to scale quickly.

Benefits Of Cloud Based Banking Software

Cloud digital banking solutions are becoming increasingly popular among different financial businesses. Let’s take a look at the main advantages of the cloud infrastructure for banking:

• Cost efficiency. Transferring data to the cloud reduces the cost of data storage and analysis. Moreover, the cloud infrastructure offers more flexible payment solutions, adjusting it as certain functions are used. Companies can adjust their budget and business plan depending on their immediate needs.
• Enhanced data security. Cloud banking software guarantees customer data safety due to the use of extra security layers, including data encryption and anti-fraud systems. Furthermore, many cloud environments offer built-in DR (disaster recovery) capabilities to help financial companies recover quickly during a mass outage or after a security breach.
• Fast service delivery. The cloud banking solution is a progressive approach to already familiar banking services. Thanks to cloud software, all functions are optimized on a large scale, simplifying your team's work. You can automate and thereby speed up most services, improving your business's competitiveness and enhancing customer experience.
• Flexibility and scalability. The cloud environment is created so it is easy to change, integrate with other platforms, and introduce new tools. This allows you to develop your business in any direction without worrying about the technical part of business scalability.
• Convenience. Cloud service providers offer a well-designed and thoughtful platform with an intuitive interface. In addition, CSPs provide constant technical support for their customers.

Challenges Of Cloud Banking System

Despite the apparent benefits of cloud banking, when introducing it into your business, you must be prepared to face some difficulties:

• Regulatory compliance. Occasionally, the compliance rules offered by cloud providers conflict with your region's established financial regulations. In this case, you have to negotiate each standard with the provider or change the cloud.
• Data migration. Transferring the entire database and all banking services to the cloud usually takes several months, so instant migration is impossible.
• Unforeseen circumstances. Situations like a failure due to human error or a hacker attack can slow your productivity. Moreover, since control over the cloud vendor's infrastructure doesn't belong to you, your organization will have to simply wait and pause business until the provider solves the problem.

Companies That Successfully Implemented The Solution

Let's look at successful projects of introducing the cloud banking system into the work of financial enterprises. These three companies are the best examples to consider:

• JPMorgan Chase. This leading financial company used the cloud infrastructure to boost the digital transformation of its services. Due to the strategic partnerships with big cloud environment providers like Google Cloud, AWS (Amazon Web Services), and Microsoft Azure, the company increased application development and deployment speed. Almost 40% of all company’s applications have been moved to the cloud. $2 billion has been spent on the new cloud-based data centers.
• Capital One. Switching to cloud banking services allowed the company to increase its operational efficiency, leverage scalable resources, optimize processes, accelerate digital transformation, and improve the quality of customer service.
• HSBC. The main goal of moving HSBC's data and applications to the cloud was increased flexibility, scalability, and cost optimization. HSBC has fully automated more than 95% of all transactions.

How To Migrate From On-Premise To Cloud Banking System

Now that you have found out what cloud banking is and how it works, you need to understand how to implement it in the financial business. The instructions below will help you with this and guide you through each transition stage from on-premise to cloud infrastructure.

Understand Your Business Needs And Requirements

Initially, you need to clearly define your business's main features and outline its main goals. In addition, you must understand your current infrastructure and workload types and determine the data you need to migrate to the cloud. This will help you find the best option among cloud service providers and ensure efficient performance.

Develop Cloud Migration Strategy And Select A Provider

When choosing a cloud service provider, focus on your business requirements and expectations from the partnership. Pay attention to the reputation, price, speed, and flexibility of the infrastructure offered.

Plan And Execute Data Migration To The Cloud

Cloud migration, which involves transferring data to a cloud infrastructure, must be carefully planned to avoid inaccuracies and confusion. Elaborate a detailed plan that considers resource allocation, deadlines, and budget. When planning, consider the possibility of unforeseen circumstances and consider how to migrate in this case.

Configure Cloud Infrastructure And Security Controls

When transferring data to the cloud, it is necessary to ensure data security and regulatory compliance. In addition to securing the migration process, ensure your provider has the appropriate security certificates. After uploading your data to the cloud server, you can customize the environment allocated to you to make it convenient and effective for running your business.

Test And Integrate Migrated Components In The Cloud

We recommend testing the data migration plan to make sure everything works properly. Integrate all migrated components into the cloud infrastructure, making the environment efficient for your business activity.

Cutover To Cloud Systems And Optimize For Performance And Cost

After testing, launch your cloud-based banking service and start monitoring. Reporting tools will help you track performance. Ensure that key performance indicators meet expectations. If necessary, make organizational changes, such as staff reassignment, freeing up the server for reuse, etc. Analyze the service's performance and optimize the possible functions.

Final Thoughts

There is still much untapped potential in cloud banking, and its popularity will increase rapidly in the coming years. Progressive companies already understand that this innovation will help them take their financial business to a new level.

Cloud infrastructure offers many advantages that can significantly improve the quality of financial services you provide. Cloud banking software provides maximum service automation, transaction acceleration, interface simplification, new integration capabilities, and first-class security measures. Of course, the cloud environment for banking brings some challenges, but if you choose a reliable provider, your transition to the cloud will be smooth and stress-free.

FAQ