Banks have relied on on-premises software systems for decades, keeping their customer data and sensitive financial information locked away in private data centers. They have been wary of moving their operations to the cloud, mainly because of security concerns. Banks have been afraid that their sensitive financial data would be at risk if it were hosted on a cloud platform that they do not control.
Accenture research (May 2022) found that about four in five respondents (82%) plan to move to the cloud — including nearly one in four (22%) who aim to move more than three-quarters — and the vast majority plan to do so in the next two to five years. [Ref 1]
According to SPER Market Research, the Finance Cloud Market is estimated to reach USD 155.81 billion by 2032 with a CAGR of 20.54% [Ref 2]
There are several reasons to it, listing the down below:
1. Digital Sophistication: Firstly in an increasingly digital world the sophistication required to run a truly 24X7 infrastructure backend has increased exponentially. The increasingly niche talent required to run a cloud-like infrastructure is challenging to attract and retain by banks.
2. Flexibility: Cloud-based services offer greater flexibility, as banks can scale their resources up or down as needed. When your “Diwali Dhamaka” or “Christmas Clearance” program might require 5x the infrastructure your on-premises has provisioned, but on the cloud you can seamlessly provision (“cloud burst”) these increased infrastructure needs without having to purchase infra for peak load.
3. Innovation: Cloud providers can offer access to cutting-edge technology architecture innovations that could improve the competitive advantage such as Microservices, Containerization, Serverless Computing, Big Data & Analytics and last but not least AI and ML services.
4. Privacy & Security: As the data protection laws like GDPR in Europe and PDP in India (yet to be enacted) get more rigorous and strict, it is easier for Banks to comply and keep their customer and the banks data safe by using a cloud service which have implemented various important features: (a) Encryption at motion and rest, (b) Multi-factor authentication © Disaster recovery and business continuity (d) Monitoring & logging (e) Regulatory compliance
5. Data Localization: This is not so much an advantage as a regulatory compliance issue, the cloud providers have moved aggressively to set up local data centers in important growth markets like India to comply with the law of the land.
Most banks have started moving certain applications to the cloud, A survey of 102 banks by the Cloud Security Alliance [Ref 3] shows how banks are using the cloud.
The above survey shows that Banks have started using cloud services to not only transition their key financial product offering but also support and administrative services like CRM, HR, Marketing and data analysis tools.
In the next part of the story, we will explore specifically SaaS based solutions by Trustt like companies that offer not only hybrid-cloud or private-cloud based digital banking services but also manage the 7x24 operations in a Saas offering.
Banks have been relying on on-premises software systems for decades, but the increasing digital sophistication required to run a 24/7 infrastructure, combined with the flexibility and innovation offered by cloud-based services, has led to a shift towards cloud-based architectures. Additionally, the growing need for compliance with data protection laws and the ease of maintaining privacy and security on cloud platforms have contributed to this shift. As cloud providers offer access to cutting-edge technology architecture innovations, such as Microservices, Containerization, Serverless Computing, Big Data & Analytics, and AI/ML services, most banks have started moving certain applications to the cloud. With an estimated Finance Cloud Market worth USD 155.81 billion by 2032, this trend is only expected to grow in the coming years.
Ref 1: Global Finance Cloud Market Overview
Ref 2 : Accenture Research Finds Four in Five Banks Planning to or Already Migrating Mainframes to the Cloud Are Doing So Quickly
Ref 3: The New York Times. Banks Tiptoe Toward Their Cloud-Based Future