The demand for cloud-based software is continuously growing as it offers numerous benefits from all various sectors. Even for personal use, platforms like Dropbox or Google Drive are widely used and popular nowadays. Using software from any device, whether it is a native application or a browser found anywhere across the globe is a seamless action. We can say that cloud computing in fintech is the newest and most pleasing thing that has become dominant in trendy society in the past few years.
Among all the major sectors, the banking industry is one of the most popular and beneficial ones due to cloud technology which is an accelerating trend driven by the powerful impact of the cloud and has brought considerable benefits to the financial sector across many areas including scalability, security, innovation, service, and many more.
Fintech startups and enterprise-level organizations are struggling a lot to provide the best services to customers and end-users when it comes to speed, performance, and 24/7 uptime in their digital products. All these services are affordable and allow businesses to deliver more security and become increasingly tough.
In this article, we’re going to mention the impact of cloud computing in the financial sector. But before we move further, let us know what exactly cloud computing is.
Introducing Cloud computing Technology
As we all know, Cloud computing is one of the most popular and modern technologies to store and manage data over the internet with a pay-as-you-go pricing system. It is the on-demand availability of computer system resources when we talk about computing power and storing data without proper management from the user’s side. In short, we can say that it is a hybrid technology of cloud computing with various services such as analytics, networking, servers, databases, software, storage, and much more over the internet. Large clouds might have such functions distributed over more than one location, each location being a data centre.
The companies providing such services are also known as cloud service providers and they generally charge for the services that are used. We can say that cloud computing is the one-stop solution for all your problems based on any kind of information.
So when it comes to fintech and the banking sector, cloud computing makes it easier for you to do things like interoperability, secure storage, 24×7 uptime, etc. This improvement in the tech industry led to many powerful transformations in a way of treating information. Rather than using a traditional way of keeping the information, many latest techniques such as IoT, Artificial intelligence, and big data have come into existence to store and manage the information directly via the internet.
Types of Cloud Computing
As we all know, cloud computing can be bifurcated into three categories which are mentioned below.
1. Software as a Service (SaaS)
Software as a service is one of the most widely used and popular delivery models in which software is approved on a subscription basis and hosted centrally. So you are not required to install and maintain your software, rather use it via the Internet, freeing yourself from hardware management and complex software. You’ll get a complete product that is managed by the service provider.
The best example of a SaaS-based application is web-based email. It is a sober application with a simplistic approach that allows you to send and receive emails where you are not required to manage additional features and maintain the servers for this program to run.
2. Platform as a Service (PaaS)
Platform as a service (PaaS) is a platform-based service that allows you to deliver everything whether you’re planning to build a simple cloud-based application or a feature-rich enterprise-level application. These computing services allow its end-users to run, provision, instantiate, and manage a module. You’re just required to have the resources that are available in a cloud service provider and use them according to your requirements with an active internet connection. PaaS is specially designed to support the entire software lifecycle such as creating, managing, testing, delivering, and updating.
Despite this, you can save a significant amount of money by eliminating additional expenses than you are investing in buying and managing the underlying application, software licenses, middleware, and more, because the cloud service provider handles everything. You just need to manage the applications and services that you are planning to build so that you can focus on the management and deployment of your applications.
3. Infrastructure as a Service (IaaS)
Infrastructure as a service (IaaS) also known as Hardware as a Service. It provides you with the required computing, storage, and networking resources as per your requirements. You only need to pay for the resources and services that you are using, no additional cost is added to it. IaaS allows users to outsource their IT infrastructures and access via the Internet.
Hence, we can say that Infrastructure as a Service is a basic building block when it comes to cloud computing service providers as it allows them to use networking features and provide data storage space.
The Future of Cloud Computing in the Banking and FinTech Industry
Cloud computing provides a great opportunity for the banking sectors to connect with their end-users directly, anytime, and anywhere using the capabilities of cloud computing. Using the internet, numerous services such as collecting information, managing, and accessing the same become easier for customers as well as the banking sector. Cloud computing is the simplest and best way to deploy and integrate with all the services which doesn’t require much effort and time from the user.
The continuously growing technology sector and evolution of cloud computing allow the banking sectors to concentrate more on the customer-centric model. The multi-channel relationship created by cloud computing helps customers at every stage of the service and allows them to store, recover, and back up enormous data of the company. Apart from storing and managing the data, delivering the software, transferring the data, and other related operations are performed easily through cloud computing technology.
The fintech and banking sectors can cost-effectively integrate cloud computing services because it helps to increase the turnover rate. The banking sector must introduce the ever-evolving data input demands without exploring the systems so that infrastructure can be adjusted hassle-free. Banks are slowly adopting cloud computing and changing the way consumers communicate with banks.
FinTech maintains considerable development and maintains growth constantly. It reduces the CAPEX and OPEX budgets and improves the user experience and service portfolio. Eradicating the main risk factors is one of the most crucial parts of cloud computing. All your data will be confidential as the security is high.
Impact of cloud computing on FinTech
1. Advanced data management
Cloud computing has impacted a lot of data management systems which is quite noticeable. We know that cloud services are not cheap, and outsourcing them to a third-party company can be the best decision for fintech industries. But with the capabilities of cloud computing, businesses can get those services at an affordable cost, upgrading, and maintaining IT infrastructure for their server. After manifesting into it at an initial stage from fundamental hardware that the company owns and then the room where it ought to be discovered since it has to be cooled well.
Also, the party that is interested needs trained and skilled employees to set up and maintain the existing systems. When the company starts to expand its services, the cost also increases and it might differ from service to service. If we have all the required servers but the software is yet not capable of maintaining huge workloads, the financial sector and customers might experience delays in delivering their services which is a negative sign. Cloud technology helps fintech sectors to manage and store user data securely as compared to others by following all the aspects of the server-side data and keeping the software updated on the company providing the service.
2. Enhanced security
We are in the age of high-profile data infringements and cyber security attacks where end-users and customers are already aware of how their sensitive data is protected. Financial institutions are responsible to protect the customer’s data and the cloud is enhancing the way financial businesses are doing this. From encrypting data to the zero trust verification process, several risks are eliminated by cloud computing in fintech. For every business, security is one of the top-most priorities. Similarly, for financial information, security is important because it has the ability to keep the data secure at all times.
3. Scalability and flexibility
We can say that fintech is one of the fastest-growing platforms nowadays. So financial giants need an infrastructure that can expand with them and help them to eradicate unwanted barriers that come their way. Cloud technology provides great agility to financial sectors so that they can easily scale and save on on-premises technology infrastructure because it is really expensive to upgrade at times. Also, when it comes to traditional banking structures, the cloud platform aims to provide the capacity to adapt to branch closures and still deliver services to numerous people as possible. Hence, it is proved that switching from traditional infrastructure to the cloud measures flexibility, accessibility, and scalability for financial giants.
4. Business efficiency
Businesses are becoming flexible and scalable, but this is not enough, cloud computing is extremely important for businesses. Businesses that are already using these services have sophisticated systems for storing data and still provide high-end security as compared to others. Data loss protection is also enabled. If we consider the operational capabilities of cloud computing companies, they far surpass that of small to mid-sized and even large organizations if the company is not experienced and professional in the technology orb. Hence, we can say that business efficiency is also enhanced in some cases.
5. Accelerated innovation
In this quickly evolving technology sector, the agility of cloud computing has been brought to the fintech industry and has revived the sector’s innovation. It helps financial institutions to build their products and reveal them in the market quickly and allow them to quickly reach the changing market demands and latest trends. The global COVID-19 pandemic has conveyed numerous challenges to the financial industry. This is where cloud computing becomes a necessity as it helps businesses to overcome such challenges in the least time possible.
6. Operational costs
If you’re still reading this, you might have known how expensive the operational costs can be. But when it comes to cloud services, they are quite less expensive than what it would cost to set up and use all the required infrastructure. So switching to cloud computing allows businesses to save a significant amount of money when it comes to system development and investing them otherwise to upgrade their actual services. This means you’re not required to invest anything additional to put into the management of resources.
7. Customer service
Financial institutions that are already using cloud computing services from enterprise companies working in the field to reap the benefits will have a better customer experience. Now the company can simply focus on providing the best customer service which is their part of working and provide better support to the users. The technical support offered by the cloud computing services to any third party is also top-notch making troubleshooting a much easier task.
8. Automated services
Lastly, we have automated services. These services are machine learning, artificial intelligence, and data analysis which are actively used during processing banking services and fraud detection. Now, these processes can be effectively managed using the capabilities of cloud computing. Processing power can just be rented making it easier for businesses to accelerate the abilities of the financial industry.
Applications of Cloud Technology in Banking & FinTech
- As we all know, Cloud computing in fintech helps to enhance efficiency in the industry and allows you to reap the benefits in the banking and financial sector. Digitalizing computing services allows them to design an infrastructure to deliver suitable services to customers.
- Microsoft Azure and Amazon web services are the best cloud providers that deliver hybrid cloud computing servers to enterprises and end-end security to the information that is stored in the cloud. It makes sure that the data is confidential and that the availability of information over the internet is only provided.
- Customer Relationship Management and Enterprise Resource Planning software are the two most popular and highly preferred software available in cloud computing. It allows banking sectors and financial institutions to keep the data protected all the time and provide excellent support to the customers.
- Cloud computing makes sure that all your transactions are secure and provides a smooth customer experience when it comes to the banking sector. Hosting through the internet using web applications enables improved speed and provides excellent services to the users.
- Typically, data centres go through multiple attacks from hackers which might lead to the loss of sensitive information in the banking sector. But with hybrid cloud computing, all your data is protected and confidential at all times, and to overcome such attacks, you need to authenticate the data centres which can be easily done through cloud computing.
- Secure online payments, payment gateways, online fund transfers, and digital wallets, are a few best examples of cloud computing services. Cloud provides a safe and suitable customer experience to all its users. Here updating the payment is a simple process if done through cloud computing.
Key Takeaway
In closing, we would like to mention that there are numerous benefits of moving to cloud computing when it comes to financial and fintech giants. After reading this post, you must have known that cloud computing is an important part of many fintech companies whether it is small or large as it helps them to build scalability and flexibility into their business models. This enables businesses to achieve agility and stay ahead of the competition.
A business that is already integrated with cloud technology benefits from scalability, reliability, efficiency, and numerous other features. Despite this, financial businesses adopt cloud computing services to enhance security measures and simplify their traditionally complex infrastructures.
