As the digital banking industry positions itself to grow exponentially in the coming years, the next logical step for financial institutions (FIs) is to migrate their core processes to the cloud. Indeed, many key players in the banking landscape are now looking into how a cloud-based core banking system (CBS) can drive significant operational improvements within their organizations.
Historically, banks typically employ an in-house IT team that handles data centers located on-site. Today, more FIs intend to transition this responsibility to off-site cloud service providers in support of modern, globally focused banking initiatives. This is because forward-thinking FIs believe that a cloud-based CBS is not only a technology to procure. For them, the goal is to establish a destination or portal where users can safely and easily do their banking via mobile or web apps.
Having a cloud-first mindset is undoubtedly an advantage in today’s market, and this article lists a few reasons why FIs should invest in this new way of handling core banking processes.
An Automated and Scalable Environment
Legacy IT infrastructures operate around strict parameters and cost a lot of money to maintain. By contrast, cloud environments offer elasticity in a way that adjusts according to current user demands.
using kyc compliance software will allow FI users to pass three-tiered KYC requirements. Users can do everything from verifying their identity with the government database to biometric and address verification and ensure compliance.
Similarly, cloud bursting can help FIs balance workloads when there is high traffic and user demand for payment processing services Put simply, having a cloud infrastructure gives FIs the freedom to scale up or down as necessary.
Cloud services operate on a subscription-based, pay-as-you-go model. FIs can save a lot of money by eliminating capital expenses that come with the need to maintain in-house data centers. Aside from this, FIs can also cut additional spending for front-office or administrative tasks by having business process management, data management, merchant collaboration, and other processes in the cloud for easy access and automated efficiency.
Increased Efficiency and Collaboration
The automated nature of a cloud environment allows bank staff to realign focus away from menial processes and into more high-value tasks like personalized customer service. Cloud infrastructures also have an “access anywhere” quality that allows banks in various locations to easily coordinate processes with each other. This resolves the problem of disconnectedness within a company’s many branches and also eliminates the existence of closed-off data silos.
Minimized Reliance on IT Staff
Having a cloud-based CBS allows banking institutions to move away from restrictive, clunky systems that previously required an entire IT department to operate. By enlisting a third-party provider to handle operations through a software-as-a-service (SAAS) framework, institutions will no longer routinely funnel money into on-site operational costs. With this, IT teams can run the technology on autopilot and free up time for other important tasks.
Business Continuity Precautions
Cloud services back up large volumes of data and store them in secure, geographically separate off-site locations. These data centers also have power redundancy measures in case of emergencies. Having the assurance of backups enables FIs to quickly recover and rebuild applications as necessary.
Network Security and Regulatory Compliance
Some FIs may question the security of moving their workflows to a web-based platform. However, having a CBS in a cloud architecture actually offers banks plenty of benefits when it comes to cybersecurity.
Unlike on-premises infrastructure that can easily be brought down by cyberattacks, cloud architectures are designed to revolve around customer data protection, risk management, and fraud detection. This is because most cloud service providers are required to abide by international security standards such as the General Data Protection Regulation (GDPR).
Wider Customer Reach
The scalability of a cloud environment allows customers to benefit from on-the-go banking services anytime and anywhere. With the cloud’s promise of seamless coordination, banks can take their services to a global level and accommodate transactions across vast distances.
Cloud environments also allow FIs to collect user data that will help them glean insights into their customers’ payment behaviors, creditworthiness, and other qualities. Having this information provides visibility on customer demands, allowing FIs to tweak strategies to attract more users and improve customer experience.
Cloud-based platforms have the advantage of having new solutions implemented almost in real-time. This greatly reduces the time needed by FIs to add the latest capabilities to their systems. In some cases, FIs can finish system updates in a matter of minutes instead of months.
Before, FIs had to construct custom features in-house to deliver interoperability with business partners. Now, cloud-native tools utilize Application Programming Interface (API) capabilities to easily integrate with third-party interfaces for tasks such as payment processing and account management. This API-enabled integration also adds immediacy to IT support and data exchanges.
Banking for the New Frontier
Cloud computing is becoming a necessary component of every traditional bank’s modernization strategy. The digital landscape is evolving fast, and key players in the financial space must keep up by offering solutions that boast improved efficiency, greater agility, tighter security, and better insight generation. It’s high time to transition away from inflexible systems that lead to costly problems in the long run. As early as now, banks should start adopting a cloud-ready mindset that’s open to more resilient and cutting-edge solutions.