The use of cloud computing in financial services revolutionized these industries. The ability to push compute-heavy processes to the cloud was a major breakthrough. An on-site server farm was no longer necessary for executing a high volume of transactions. Instead, processes that required extensive memory and resources could be outsourced to a third-party server bank capable of hosting the requisite data and operations.
As cloud computing technology advanced and adoption became more widespread, flexibility and scalability of day-to-day operations in the financial sector improved. 83% of companies surveyed in a study by Google Cloud utilized cloud computing technology as a primary component in their IT infrastructures.
First, we’ll walk you through the ways that a cloud computing financial model can work for your business. Second, we’ll go over the basics before taking a deep dive into the financial benefits of cloud computing. In the end, the advantages cloud computing can offer to the financial services industry.
What is cloud computing?
Cloud computing is a catchall term for outsourcing tasks to offsite computers:
- Applications range from storing your personal photo library in iCloud,
- To caching bank data to recording cryptocurrency transactions on the blockchain,
- File sharing systems that allow people in separate locations and with different operating systems to collaborate effectively.
On-site compute power and even in-house software are no longer strictly necessary for banking and finance companies. New players who can’t afford a massive on-site server farm like the big banks can easily even the playing field by constructing a more effective IT infrastructure.
Emerging cloud computing technologies promote greater synergy between cloud servers and the end user experience. For instance, if you are starting a new wealth management platform, transactions will mostly take place in the cloud. Meanwhile, your users will be anxiously monitoring their assets from a personal device. Integrating a seamless and accurate display of user account information on a mobile app with the compute-heavy processes occurring in the cloud will require up-to-date edge computing solutions uniquely tailored to the services your company offers.
Just as advances in technology bolster cloud computing infrastructure, so cloud computing influences the direction of technological development. The financial benefits of cloud computing include outsourcing expensive server infrastructure and energy costs to a third party, allowing companies to pour more money into bolstering security and increasing customer satisfaction. New hardware and software is being developed as businesses and cloud service providers identify novel consumer demands and security risks in a cloud-based economy.
How does cloud computing affect technology?
When it comes to technology specific to the financial services industry, edge computing and app development go hand in hand. The International Data Corporation (IDC) predicts that the number of apps operating at the edge will increase by 800% by 2024. Banks and finance companies have a keen interest in developing apps that bring vital data closer to their end users even as the burden of compute power stays firmly in the cloud. Neil Gallagher of Fintech Futures reports that banks who wish to stay competitive will be investing in IT infrastructure that provides connectivity solutions throughout the globe, creating a smooth customer experience in both urban and remote locations.
When processing key pieces of data at the edge—that is, decentralizing the cloud and moving some of its operations closer to the end user—new security risks must be addressed. Many of these security issues involve edge hardware, which may not be designed or approved by the cloud service providers themselves. Edge computing technology that can safely interface with a secure cloud will require modifications like circuit replacement, physical hardware locks, and built-in intrusion detection systems. Financial institutions should issue desk terminals and work laptops to their employees with these new technologies.
How does cloud computing affect the banking and financial services industries?
The role of cloud computing in the financial sector is expanding. Its use is proven time and time again to reduce costs, increase storage capabilities, and enable remote work. The financial services industry is also finding that cloud-powered AI generates real-time insights into the stock market, along with being able to offer timely and useful advice to their clients through customer support bots.
Cloud computing in financial services regulation can impact compliance policies. Canadian financial institutions are expected to comply with Office of the Superintendent of Financial Institutions (OSFI) Guideline No. B-10, which defines principles for the outsourcing of business functions and processes. Other countries may have similar requirements. It is important to note that regulatory entities interest lies in protecting clients and investors from security risks. Banks and finance companies are a part of them.
Cloud computing technology can be a useful tool in enhancing security for financial transactions, if used correctly. Providers of cloud services are security experts who understand how to mitigate risk from hacking and phishing attacks. Financial institutions recognize the expertise that these services have to offer in combating new cyber security threats. Companies in the financial services industry are incorporating cloud computing into their IT infrastructure simply to protect the security of their clients and investments. Even though it means having to make changes in their existing compliance policies.
Invest in the right technologies and tools for cloud computing
In financial services, cloud computing solutions are valuable thanks to their :
- Robust security,
- Potential to scale,
- Agility in data processing and operations.
To sum up, cloud service providers, financial services companies offer not only a market for their product, but a source of ideas for further innovation. Technology and the cloud feed off one another to define the future of hardware and software.
The next generation of competitive finance apps will use edge computing to keep up with the cloud and consumer demand. Devices used with these apps may require customized security hardware. With decades of expertise in finance and IT, Hypertec can jump start your IT infrastructure for the new era of cloud computing in the financial services industry.
From today, accelerate your IT infrastructure with a customized platform with cloud integration.
This post is also available in: FR