" class="no-js "lang="en-US"> How Cloud Computing Could Save Financial Firms
Friday, March 29, 2024

How Cloud Computing Could Save Financial Firms

The financial sector has historically shied away from cloud adoption and somewhat lagged behind other services in taking the digital plunge. This comes as no surprise, given that financial institutions are part of one of the most heavily regulated industries for security and data privacy, having to follow stringent regulatory requirements to avoid litigation and financial penalties. And with good reason, as the high volume of sensitive information financial enterprises deal with, including credit card details and personal identifiers, is extremely attractive to cybercriminals.

However, digital transformation, accelerated massively by the Covid-19 pandemic, has changed the face of the Financial Services industry, creating an almost overnight shift in how businesses and consumers move money. The establishment of global lockdowns have exposed inefficiencies of legacy operating systems and, consequently, the need for financial institutions to develop a model that quickly adapts to ever-changing consumer requirements, risking otherwise being left behind.

In this context, it seems that cloud migration in the financial sector is set to grow exponentially, as the advantages such a move offers are increasingly hard to go amiss, from increased flexibility and scalability to significant cost savings.

 

Data security concerns

There’s an unprecedented pressure for traditional banks, credit unions or insurance companies to move their services to the cloud. But concerns over data security remain a blocker. In the UK, for instance, although most banks use cloud services, the majority have migrated less than 10% of their business. And, globally, even for those who are further along the cloud adoption curve, 60% still rank data confidentiality as their top worry, followed by loss of control of data and compliance issues.

The thing is, cloud services, when deployed correctly, actually provide higher security controls than on-premise physical servers. For one, data centres typically take responsibility for the security of their infrastructure, and therefore adhere to maximum security standards. This includes physical power and cooling, levels of redundancy, and uptime SLAs. Additionally, with cloud technology, it’s not just your usual antivirus software that gets installed; you can also have managed firewalls, data encryption, SSL certificates, intrusion detection systems, DDoS defence – and the list goes on. Not to mention that most cloud hosting providers are compliant with security certifications such as ISO 27001, ISO 27017 and Cyber Essentials.

Private cloud, in particular, gives financial services peace of mind of having total control over every aspect of the cloud environment, as the latter is run on a dedicated server rather than a shared one. This ownership, known as single-tenant architecture, assures financial companies that their data is inaccessible to any unauthorised person. It also means that the IT infrastructure can be customised to meet business requirements not just where performance is concerned but also in terms of process control and authentication.

Will our regulator allow us to move to the cloud?

Regulatory reporting requirements are constantly evolving in the financial sector, and cloud computing seems to increase financial institutions’ capabilities to meet such qualifications. For example, it helps banks conduct intraday liquidity and risk calculations, as well as mine trade surveillance data to detect anti-money laundering and other fraud issues.

Renowned regulators such as the Bank of England have in fact endorsed cloud adoption, reflecting the technology’s true advantages for the sector. That is to say that those worried about meeting regulatory requirements when migrating to the cloud often lack the knowledge of the protocols that need to be put in place. In other words, there’s a need to educate finance professionals on the benefits of cloud – and a translation exercise between financial enterprises, regulators and governments to clarify the requirements for operations in the cloud.

Enabling business innovation

Amongst the cloud’s biggest benefits are scalability and flexibility. Moving workloads and applications to the cloud can increase a company’s ability to innovate through greater productivity and efficiency. As a consequence, services that once took two or three weeks to implement, can now be instantly spun-up in the cloud and put live. This skill to quickly respond to new business demands gives financial organisations severe competitive advantage, as it allows them to become more agile in offering new products and services according to consumer needs.

Cloud migration also helps increase operational efficiency. Think about it; once internal and external data sets are combined in one place, the enterprise can easily apply advanced analytics for integrated insights. This improves the automation of processes and augments the human user experience.

Increasing cost savings

Cost saving is probably the main driver to cloud migration by financial companies – 11% of banks believe that public cloud will deliver more than £20m in savings in the next two years. And understandably so. Cloud computing gives financial services a pathway to updating aging systems without committing to costly capital investments; to responding more quickly to market shifts or changes in financial priorities; and to increasing or decreasing computing capacity as needed, facilitating granular spending control. Private clouds, especially, offer a fixed billing model, which ultimately allows businesses to plan growth and budget more effectively in the long run.

Cloud will revolutionise banking

Cloud innovation is fast becoming a necessity for traditional financial companies to stay competitive and lead the digital transformation race. Fintech startups are living proof of how to successfully leverage cloud computing to stay agile and meet customer needs on-demand.

Those seeking to remain profitable in the digital era can no longer overlook benefits including time to market and advanced analytics. Private cloud offers financial services an opportunity to drive growth, improve customer experiences and stay up to date with ever-changing compliance regulations whilst keeping their data safe.

Jon Lucas , Co-Director,  Hyve Managed Hosting

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