TheNFAPost Podcast

The need for innovation and agile solutions has the world moving towards cloud technology. Organisations across industries are transitioning from legacy systems to the cloud by building micro-services architecture to keep pace and create robust business models. In banking, the ask has been even more challenging.

The millennials expect banking services to be seamlessly available at their convenience and comfort. With the recent need for remote working, omni- channel experience and heightened risk mitigation, the industry’s need for digital transformation and cloud adoption has become even more pressing. This has led to the rise of cloud banking.

The Rise of Cloud Banking

Cloud Banking refers to using the cloud to access, store and operate data. It is similar to traditional banking – except that the entire banking data is on the cloud. From core banking systems to customer experience, there has been a constant rise in all the banking processes moving to the cloud. It enables the process owners with better agility, optimised IT spends with pay-per-use models, and delivers ease of access across its systems and users.

Banks don’t need to start right away. Instead, it is possible – even encouraged – to migrate in stages and manage adoption as a transformational journey, rather than a one-off project that will take a considerable amount of adjustment.

Banks should see the move to the cloud as a gradual transition and start by selecting the most pressing workloads and services to transfer in a controlled manner. This approach will ensure that workloads are moved across securely, nothing is lost in the process and customers aren’t impacted by significant periods of downtime. This will result in a hybrid technology infrastructure which leads to reduction in operational costs.

The Banks of Tomorrow

While cloud adoption has been consistently growing over the years in the banking industry, there is still a large piece of the pie that is resistant to cloud migration. Processes that are around the center of banking such as core banking, treasury, card management, trade, etc. are still managed on-premise with concerns cited as security and compliance. With recent advancements in cybersecurity and risk management, banks will have to design a roadmap to transition the core to the cloud in the recent future.

Cloud is not just a trend. It is a technology tool that helps organizations to build agile business models and economies of scale. With a plethora of service offerings such as IaaS, PaaS & SaaS models, banks can identify and leverage the option best suited for them and their operations.

Cloud also delivers security. With cloud, the whole security layer management is owned by the cloud OEM and hence can deliver best-of-breed security offerings that are accepted and used globally. These cloud models will enable banks to enhance revenue growth, contain costs, deliver market-relevant products and unified customer experience quickly and efficiently; and help monetize enterprise data assets.

Cloud helps you to break data silos. With all the data being migrated to cloud, it helps you to break those on-premise data islands and gather all your data at one place. It helps you to synchronize the enterprise by breaking down operational and data silos across risk, finance, compliance, and customer support. Once massive data sets are accumulated, the organization can apply advanced analytics for integrated insights.

The Challenges

While cloud may seem like a probable and convenient option for banks, the transition is not that simple. Banks have a huge security burden on their shoulders – customer data and most importantly – money. Any change in the existing setup has to be designed and tested vigorously before taking it to production.

Even the slightest error in programming can eventually lead to billions in damages that might hurt the bank and its reputation. So, let’s look at the challenges faced by banks while adopting cloud models:

Security

Banking data contains sensitive customer information. Keeping it secure from cyber-attacks is paramount for banking sectors. And as mentioned earlier, exposing the data to new developers, technology partners, and integrators can prove to be very challenging.

Compliance

The banking industry in India is mandated to comply with stringent standards set by the regulatory body. It mandated that the customer and other banking data be placed and stored in data centers within the country.

It is also mandated for some core processes to have their data placed on-premise and does not allow data sharing between third parties, external servers or data centers. As a result, banks stay away from cloud OEMs who do not comply with these norms to avoid high penalties.

Benefits of Cloud Banking

Focus Shift

With cloud banking, the ownership of cloud and infrastructure management lies with the OEM. This means that banks can focus on value-added functions more closely aligned with their core business objectives. This will help to increase productivity and enable teams to enhance customer satisfaction and roll-out products to market faster, therefore allowing them to maximize their return on investment.

Scalability

A further benefit of cloud adoption is increased scalability. It is always challenging to design and scale business on-premise and on-demand. Currently, most of the cost is poured into scaling on-premise hardware and acquiring their licenses. It also affects cost when these scaled up databases are left unused in non-performing seasons. This limits agility and does not allow flexibility in operations. Adopting cloud solutions allows banks to scale up or down on demand, with cloud services being able to scale-up and ramp-down as needed almost immediately. This provides a far better way to manage costs in line with user and business demands.

Data Synchronisation

Breaking down data silos and integrating business units through data sharing will lead to integrated decisions and faster problem solving. Creating common, connected data sets will enable deeper, more sophisticated insights and analytics; thereby, enhancing collaboration through new shared platforms and tools, and increasing speed of decisions.

Increased Security

Data security concerns are paramount for bank leaders. The on-premise approach might prove to be its own Achilles’ heels. Legacy infrastructure built with monolithic architecture might fail to detect and address new risks and vulnerabilities. Systems that are never exposed to new ways of cyber-attacks can be vulnerable to them. This is where cloud could help.

Cloud OEMs around the world have invested millions in research and development of systems that can identify and mitigate new and potential ways of cyber-attacks. Cloud computing has paved the way for new and successful alternatives that prevent data tampering and hacks. It provides an up-to-date customer-centric platform with excellent security to safeguard banking data.

Regulatory compliance

Cloud can help banking compliance with mandated processes such as regulatory reports and audits. With the help of cloud, audits can be carried out seamlessly due to integrated system and synchronized enterprise. It can also help to automate regulatory mandates, report generation, risk identification, fraud detection and so on.

The benefits of cloud banking are increasingly evident, with enhanced security, increased customer satisfaction, faster product development and system agility. The move to the cloud can also introduce important capabilities to access and mine data more prolifically as well as provide opportunities for significant cost reductions through automation. Globally, these advantages are expected to push revenue for the cloud computing industry up 50% to $364 billion in revenue in 2023.

A Better Tomorrow

We are witnessing a shift in banking – from brick-and-mortar ideology to a more modern banking approach. Banks are gradually moving towards an omni-channel, synchronized system where the enterprise can function as one. With cloud banking, the approach can be extended further, with focus on innovation, enhanced customer satisfaction to create products-on-demand and deliver a rich and unified customer experience.


Neelesh Kripalani
Chief Technology Officer, Clover Infotech

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