More than ever, financial institutions need to leverage modern technology to deliver improved customer experiences, at a lower cost, in real time. This requires the collection and processing of multiple data sources and the modernization of legacy systems and outdated operating models. Without an improved infrastructure, traditional financial institutions will be ill equipped to compete with more responsive and innovative competitors.
The majority of banking and financial services organizations have yet to deploy core systems to the cloud due to significant complexity and concerns over security, risk, governance and control. In fact, according to a 2020 IBM banking on open hybrid multicloud survey, “While 91% of financial institutions are actively using cloud services today (or plan to in the next nine months), only 9% of mission-critical regulated banking workloads have shifted to a public cloud environment.”
Traditional banking systems are outdated and inflexible, making it costly to deploy new solutions or protect against advanced security risks.
To address the need for capacity and speed, banks and credit unions are increasingly looking to cloud computing solutions to store data and support applied analytics. The result can be increased customer insights, improved efficiency, enhanced innovation, greater agility, and a reduced risk of security or business continuity breaches. As an overarching organizational advantage, cloud solutions can augment human productivity, providing insights that can positively impact both front-office and back-office transformation.
It is imperative for financial institutions to replace outdated on-premise infrastructure that has become harder and harder to update and increasingly costly to maintain. More than ever, successful organizations must look for flexible, scalable solutions that are both responsive and efficient. The technology is now available to help smaller banks compete. Waiting to leverage these new solutions is not a winning strategy.
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What is Cloud Computing?
Cloud computing is the delivery of computing services – including software applications, data storage, and processing power – on demand, over the internet. As opposed to owning modern computing infrastructure, banks or credit unions can use cloud computing solutions to replace or augment anything a current data center provides. This helps organizations avoid the upfront cost and complexity of owning and maintaining increasingly complex IT infrastructures.
Because of the need for modernized back office technology, the spending on cloud computing solutions continues to increase while spending on traditional, in-house IT continues to slide. Options include public cloud services offered by vendors, private clouds built by a financial institution, and hybrid cloud solution that combines a private cloud with one or more public cloud services, leveraging proprietary software to facilitate communication between the two.
Benefits of Cloud Computing
Cloud computing solutions have served as the catalyst for digital banking transformation, providing benefits that impact both front office and back office operational models. These benefits will make financial institutions more future-ready, while providing the springboard for improved customer value and revenues.
Increased Customer Insights. Customer data contains insights that can only be unlocked with advanced analytics. The results of real-time data analysis can provide the foundation for a level of personalization and proactive engagement across all channels not normally possible with legacy infrastructure. With analysis available instantly, a bank or credit union can understand individual customer behavior that can trigger ideal actions that drive conversion, increase engagement, and build loyalty.
Improved Efficiency. Many financial organizations struggle to streamline, automate and connect the back-office processes that impact customer experiences. Cloud technology can bring together multiple data and operational systems that reside in silos and impede efficiency. This can shift the time currently spent looking for insight to more productive and impactful analysis and decision making.
Cloud-based infrastructure can help banking organizations react to marketplace changes in an instant.
Enhanced Innovation. Cloud technology can shorten product deployment cycles and simplify product testing, allowing financial institutions to test new innovations in real-time and react to market acceptance (or rejection) quickly. Cloud solutions also facilitate open banking possibilities, expanding the solution set for consumers across traditional and non-traditional financial services.
Greater Agility. For banks and credit unions wanting to achieve greater business agility, cloud technology enables organizations to respond instantly to changing market conditions, leveraging data and applied analytics to achieve customer experience and operational productivity benefits. From responding to changing consumer or competitive dynamics, to allowing for the scalability of technology use, the opportunities are extensive.
Reduced Data and Continuity Risk. What used to be considered a weakness of cloud technology has become one of its greatest strengths. Cloud computing provides a viable alternative to outdated systems that are increasingly vulnerable to data tampering. With the potential for instant identification of potential breaches, to embedded security to safeguard banking data, cloud solutions can provide added comfort from cybersecurity risks. Cloud solutions can also provide a high level of redundancy and back-up to improve disaster recovery.
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The Future of Banking Will Reside on the Cloud
The key to successful digital banking transformation includes embracing the cloud. While there have been reservations in the past around cloud security and regulation, cloud computing solutions are becoming prevalent in the marketplace for both traditional and non-traditional financial institutions.
The use of data and deployment of advanced analytics, machine learning, and artificial intelligence requires more processing power than all but the largest financial institutions posses. The good news is that there are several cloud-based solution providers, like IBM, that have created industry-specific solutions for the banking industry.
According to IBM, “Organizations have an enormous opportunity to leverage cloud computing to drive innovation and improve their competitive position. Cloud computing – whether private, hybrid or public – enables organizations to be far more agile while reducing IT costs and operational expenses. In addition, cloud models enable organizations to embrace the digital transformation necessary to remain competitive in the future.”