Partly cloudy: why the financial industry should use cloud technologies?

What is cloud computing?

The US National Institute of Standards and Technology defines cloud computing as “a model for enabling ubiquitous, convenient, on-demand network access to a shared pool of configurable computing resources (e.g., networks, servers, storage, applications, and services) that can be rapidly provisioned and released with minimal management effort or service provider interaction.”

This cloud model is composed of five essential characteristics, three service models, and four deployment models.

Cloud computing: characteristics

The main characteristics of cloud technology are:

  1. On-demand self-service: The computing resources, such as server time, storage and network bandwidth, don’t require human interaction with service providers.
  2. Universal network access: A user can access systems regardless of location or device (PC, mobile phone, tablet, etc.).
  3. Resource pooling: This includes multi-tenancy that enables the sharing of pooled resources and costs across a number of users. The resources are dynamically distributed and re-distributed according to a user’s needs.
  4. Scalability: Quick scale up or scale down of resources through elastic provisioning or the release of capabilities in almost real-time.
  5. Pay per use: This model presupposes you pay only for the time when the resource is used.

Cloud computing: delivery models

There are five major delivery models to look at:

  1. Software as a Service (SaaS)
  2. Platform as a Service (PaaS)
  3. Infrastructure as a Service (IaaS)
  4. Business Process as a Service (BPaaS)
  5. Data as a Service (DaaS)

Cloud computing: deployment models

  1. Public Cloud: A public cloud is available over the internet to everyone. The cloud provider manages and owns everything from operations and facilities to computing resources. Popular public clouds are Amazon EC2, Google App Engine, and Microsoft Azure.
  2. Private Cloud: A private cloud is available only to trusted users of an organization or group. Everything in a private cloud can be managed either by the organization or the cloud provider.
  3. Community Cloud: A community cloud is accessible to members of a larger community comprised of different organizations or groups, and where partner organizations and the cloud provider co-manage everything from operations to facilities.
  4. Hybrid Cloud: A hybrid cloud is a mix of multiple public and private clouds, and it addresses the challenges of a pure public or private cloud environment.

Overview of the financial industry and cloud market

The financial industry isn’t against the soaring popularity of cloud computing. The largest organizations have admitted that this technology has affected them positively. The cloud system has helped them use their functions more efficiently.

According to MarketsandMarkets data, the finance cloud market will soar to $29.47 billion (24.4%) by 2021. This growth will be driven by specialized services and the need for business agility and market focus, aside from the customer management benefits.

Benefits of the cloud for financial companies

High level of security

There is no doubt that security is a top priority when implementing any new system. However, many businesses are moving to the cloud nowadays to level up their security.

We have to admit, we live in a world, where data breaches are the new normal. More data was stolen in the first half of 2017 than for all of 2016. And in December 2017, a database of 1.4 billion stolen usernames and passwords—the biggest of its kind ever found—was discovered on a hidden site, all set up for hackers to use.

Cloud computing provides a highly resilient security architecture and goes through stringent security checks regularly.

Cost-effectiveness

Cloud technologies will help reduce the expenses of servers and data centers as well as other core IT infrastructure. This removes the total cost of ownership and maintenance of the system.

Compliance

Cloud vendors take stringent measures to make sure that in joining with and offering services to finance companies, no compliance issues are violated. Compliance bodies work with the major cloud vendors for monitoring purposes. However, financial organizations should discuss all the details before signing up with any vendor.

Dealing with big data

Storage is one of the largest advantages of choosing the cloud. This sphere generates unbelievable amounts of data on any given day due to insurance documents, loans, transactions, and payments.

Unlike the traditional system where constant upgrades are required, cloud computing provides unlimited storage. So, companies never have to worry about increasing amounts of data.

The cloud provides easily scalable storage that can be increased or decreased in a matter of seconds through a cloud dashboard. In addition to its scalability, many cloud providers offer storage solutions for a fraction of the cost of purchasing, operating, and maintaining internal storage servers.

Scalability

Although financial institutions have more than sufficient resources, it is possible to face spikes in different sectors at certain times. Cloud computing scales resources easily without the requirement of any intervention to make sure duties are performed without any issues.

Mobility

Cloud computing allows employees to work on the go. They can use their personal laptops and smartphones for real-time monitoring and analysis, having constant access to company emails, business apps, and CRM tools. All in one place.

IaaS power

The cloud provides Infrastructure as a Service (IAAS) with a huge benefit – reduction of costs on deploying, testing, and running applications within in-house resources. In addition to giving businesses a testing platform for new applications and projects, the cloud offers super high-level computing and processing capabilities.

In the financial industry, AWS is a popular choice for running credit risk simulations. With the power of the cloud, this lengthy process that used to take hours (before) to complete can now be executed in minutes. This means financial organizations can make decisions faster, and streamline their operations, which can, in turn, have a positive influence on profitability.

Conclusion

According to a survey by PwC, 52% of asset management CEOs believe that cloud computing will be strategically important to their organization and 65% of financial services companies said they have already adopted cloud-based security as part of the new infrastructure.

The cloud is taking the world of technology and all other industries by storm. Financial industries, in particular, should not delay in digitizing their services and migrating to cloud with a reliable software development partner.

Featured image source: Freepik

Published by Nikita Kotliarov

I'm a solutions advisor and marketing manager at SmartexLab, where we help to digitize the financial and healthcare industries. I'm also a blogging enthusiast so from time to time I like to share my thoughts with people.

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