In 2019, only 18% of financial institutions implemented cloud technology on a large scale. Such companies fared much better against the 2020 pandemic chaos, unlike their more conservative competitors. For instance, 78% of banking CFOs reported feeling pressured by investors who required them to reduce costs and meet quarterly targets. The traditional office mentality wasn’t of any help, holding them back and obscuring their options.
Even after relatively taming the pandemic, the BFSI sector remains on high alert, searching for new solutions capable of preventing such stressful scenarios from happening again. For 54% of institutions across the US, cloud technology became a go-to solution, prompting BFIS giants like Wells Fargo and Goldman Sachs to migrate to new infrastructure. Yet, some C-level executives still have doubts about cloud banking.
While reasonable, ranging from expenditures to security concerns, these doubts should be addressed and analyzed, so they wouldn’t end up holding the company back from its well-deserved growth.
For that reason, we'd like to provide some food for thought by enlisting five ways cloud technology can revolutionize banking, solve leaders' top-of-mind concerns and help them untether their approach from the obsolete office-centered mentality.
1. Optimal OpEx vs. CapEx balance
When it comes to purchasing a product or a service, C-level executives have to consider the impact their decision will have on their capital expenditures (CapEx). Would their purchase be helpful in the long term? Will it address the company's pain points? Or will it just add up to the debt levels by increasing operational expenditures (OpEx)?
There is a lot of uncertainty to deal with, and business leaders won't give their agreement unless they have a clear understanding of expenses and ROI.
That's where the predictability and agility of cloud banking come into play. No expensive hardware to maintain, no need for hiring and paying new experts, no fuss with powering down unneeded servers — less OpEx in the end.
Additionally, C-levels have more control over the computing resources necessary for running a cloud project — they can optimize monthly expenses by adding or removing resources, depending on the company's current needs. This allows leaders to manage their assets and plan their OpEx more efficiently while calculating the return on investment (ROI).
2. Unrestrained scalability
During the COVID-19 crisis, traditional banks realized the need to do more than comply with health safety guidelines. They had to undergo rapid change, advance to new levels of flexibility, and facilitate a seamless shift to digital experiences for customers.
As on-premise solutions lacked the capacity for handling such monumental tasks, banking institutions needed to scale up. However, a traditional approach required investing in new hardware and software, buying more storage space, and expanding the set of works needed for scaling up properly.
Whereas cloud banking approach erases this tedious preparation process, allowing banks to scale up almost immediately by using “cloud-born” features and dynamic infrastructure.
What’s more, cloud banking solutions come in several models (public, hybrid, and private), allowing for better adaptability based on the company’s workflow and preferences.
By opening the door to new configuration and scaling possibilities, cloud banking also paved the way for innovation. Potential digital transformation has become more accessible to traditional banks, improving their preparedness for shifts in the market.
3. Enterprise synchronization
It was a common belief that on-premise tools are more reliable and efficient than cloud-based technology. However, the post-COVID period turned the tables on that opinion. Banks need to do more than maintain their effectiveness — they have to boost their efficiency and customer satisfaction. Basically, banks were among key institutions tasked with helping slow down the spread of coronavirus and adjusting clients to new realities. They needed to revolutionize their internal processes and improve communication between all units.
In this context, cloud banking solutions unlock the opportunity to connect multiple datasets and business units into a single workflow. Every department gets instant access to important data, faster updates, and better cooperation options. This change allows banks and financial services companies to improve both customer and employee experiences.
Increased data accessibility lets support teams and account managers solve issues faster, adding to client satisfaction. At the same time, shared cloud-based platforms help drive informed decisions and boost company-wide productivity.
In addition to streamlining workflow and improving customer service, cloud banking allows business leaders to lay the foundation for innovation and new projects. By creating new employee capabilities, they will be able to impact new customer experiences and assist them with overcoming potential crises.
4. Increased resilience
Managing disruptions and physical outages and ensuring long-term resilience are key banking pain points. Fast, almost instant response is vital for C-level executives.
With cloud technology, banking institutions gain game-changing benefits that help them adapt to potential challenges.
AI-BASED BOOST
Modern cloud-based AI solutions simplify document processing by extracting key information from unstructured data, improving client feedback analysis, and injecting valuable banking insights into the workflow (e.g., credit and loan default predictions).
AUTOMATED VERIFICATION
Know Your Customer systems play a vital role in fraud prevention but are a common reason for low customer satisfaction (due to repetitive and lengthy verification processes). Cloud-based automation allows banking institutions to remove the frustrating parts without compromising their reputation.
ANTI-FRAUD MEASURES
Cloud banking enables better and more thorough monitoring of data (e.g., trade surveillance data mining) to prevent money laundering and financial fraud.
IMPROVED INTEGRATION
Adopting cloud technology leaves more space for further digital transformation as cloud architecture makes it possible to distribute data across multiple tools and applications used in the workflow.
RISK CALCULATION
Cloud banking allows painting a clear picture of where digital transformation and workflow will be taking C-level executives in the future, by streamlining liquidity and risk calculation processes.
5. Better data security and compliance
Since employees made it explicitly clear that they would rather look for a remote-friendly workplace than return to the full-time office word model, C-level executives had to adapt their workflow to the hybrid type. That change came together with data security concerns, creating a dilemma. Losing a trained employee to a more accommodating employer would cause considerable financial damage, but losing important business data to hackers exploiting employees' home network imperfections would be a reputational catastrophe.
Fortunately, with the alternative offered by cloud banking, employers don’t have to risk turning their employees away for the company’s sake. While some financial services leaders believe that moving to the cloud increases the risk of data theft, the facts state otherwise — 61% of security professionals believe cloud to be safer than on-premise assets. Their preference was influenced by a wide range of security layers offered by cloud.
REGULATORY COMPLIANCE
Keeping up with regulatory requirements (Solvency II, BASEL, etc.) is crucial for financial service leaders. Cloud computing makes regulatory compliance manageable and decreases systemic risk by moving sensitive data to a more resilient and transparent infrastructure.
CYBERSECURITY
Cloud banking structure can be fortified by numerous cloud-born solutions such as firewalls, antimalware systems, spam filters, etc. These easy-to-integrate measures allow protecting data and employees across departments from all kinds of threats (phishing, ransomware, C-level executive phishing attacks).
SAFETY PLANNING
Cloud banking solutions deliver data-brokering placement capabilities based on CSP certifications and data criticality, securing responsible and transparent data processing with multiple backup plans and data retrieval safeguards.
ENHANCED STRUCTURE
Cloud infrastructure is designed with resilience and safety in mind. Knowing that accessible data would be targeted by hackers, CSPs protect their product with encryption, swift with reliable data backup and recovery.
Although cloud adoption still requires keeping a close eye on integration and handling of sensitive data, the technology provides financial services leaders with much better control over data management.
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Cloud banking does more than relieve C-level executives of their long-time financial, compliance, and security concerns. It drives tangible value by upgrading the company’s scalability, synchronizing internal workflows, and shaping better digital experiences for employees and customers.
With cloud-based upgrades, banking organizations find more capacity for growth and resilience needed for potential future challenges. No wonder, cloud technology is considered the future of banking and financial services, expected to deliver up to $80B in run-rate EBITDA to Fortune 500 BFSI companies by 2030.
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