Cloud Computing and IT in BFSI Sector
In recent years, cloud computing has gained a lot of traction. Cloud computing, as one of the most important and fast evolving technologies, has enabled a slew of other disruptive technologies, including big data, artificial intelligence, the internet of things (IoT), and others. It has transformed many key banking activities, bringing with it a slew of benefits such as cost savings, usage-based billing, business continuity, agility, interoperability, and safe storage, to name a few.
Previously, companies in the BFSI ecosystem were wary about cloud infrastructure, citing worries about privacy, security, regulatory requirements, and the complexity of integrating internal and third-party legacy systems. Financial organizations are aggressively pursuing cloud computing solutions as a result of an increase in banking services such as payment gateways, online transactions, digital wallets, and omnichannel customer service, among others.
Why is Cloud Computing Important in BFSI?
For an efficient banking experience, the banking, financial services, and insurance industries deal with large amounts of data. The digital revolution in the sector is being driven by rapid technological innovation and digitization. Banks, on the other hand, are significantly investing in cloud environments, including public, private, and hybrid clouds, in order to make banking procedures easier and more convenient.
Financial services and insurance businesses benefit significantly from cloud computing usage in BFSI.
Cost-effectiveness
Financial organizations can take advantage of modular capabilities by integrating the cloud, avoiding the underutilization that commonly occurs when physical architecture is expanded. It can help to reduce a big upfront capital investment by reducing the requirement for specialized hardware and software, as well as the staffing required to maintain them. It also helps banks and insurance companies to concentrate on their main customer-facing functions.
Shorter Time To Market
BFSI organizations will be able to respond swiftly to changing markets, client needs, and technology demand thanks to cloud computing. In comparison to traditional on-site environments, it also allows applications to be designed, tested, and deployed in a fraction of the time. Integrating the cloud also facilitates communication between parties and institutions.
Reliability
Cloud computing provides a complete data backup, making it a very trustworthy solution in the financial services industry. Banks are seeking new ways to solve client pain points as the fintech ecosystem revolves around the world, challenging established BFSI conventions. Data privacy is one of the issues. Banks may secure their data while taking advantage of the cloud's increased flexibility and scalability by using the hybrid cloud approach.
Security
The financial services industry has long been concerned about keeping data safe and secure from illegal access or damage. Concerns about data security and traditional technology, such as capacity, redundancy, and robustness, can be mitigated by using the cloud.
Productivity
From email to application development and testing, client administration to data intelligence and storage, banks handle a wide range of tasks. These procedures, on the other hand, take longer and are more prone to errors. Cloud computing greatly reduces the amount of time spent on such activities, allowing employees to focus on more important duties and increasing productivity.
Cloud computing also has a regulatory benefit. The regulations in databases can be ensured since suppliers can entirely secure the data or provide partial access to specified data.
Cloud Computing Challenges in Banking and Financial Services Sector
Despite the tremendous advantages of cloud computing, many financial institutions are unwilling to implement it. Here are some of the obstacles that are preventing banks from implementing it:
- Data and Security: Sensitive information is stored in the bank's data. For financial sectors, keeping it safe from cyber-attacks is critical. Security is a challenge with any technology, and the cloud is no exception. Security breaches are unavoidable, but they may be avoided.
- Compliance and Regulatory: As a bank, you are required to adhere to certain guidelines. Customers' financial data must be kept in the same nation, according to many banking regulators. Valuable data must not be combined with other data on shared servers or databases, according to certain compliance standards. As a result, banks must have a clear awareness of where their data is stored in the aforementioned ecosystem.
- There is no complete control: Financial firms are concerned about losing control of their vital business apps and data. Transferring it to a third-party cloud service provider could limit your ability to be flexible and agile. As a result, corporations are hesitant to go to the cloud since they do not have control over a big amount of data.
To handle security, control, and compliance concerns, financial organizations must choose the correct partner, services, operating models, and deployment.
Adopt The Right Model
Assume you're a financial institution looking to reduce operational costs by switching from a capital-intensive approach to a more flexible business model. In that scenario, it's critical to think about hiring a seasoned vendor. The key to success is selecting the correct service model for your company's needs.
- BPaaS (Business Process as a Service) – Billing, payroll, and human resources are examples of regular company procedures that use this approach.
- Software-as-a-Service (SaaS) — In this approach, the service provider hosts business software and related data. A web browser is used to access software and data.
- PaaS (Platform-as-a-Service) – Businesses can use their platform to design, run, and administer their applications. It eliminates the need to deal with infrastructure issues. Custom app development, maintenance, and support are all made easier using PaaS.
- IaaS (Infrastructure-as-a-Service) – Enterprises can purchase software, servers, network equipment, and data center space as fully outsourced services without having to invest in these resources.
Taking Advantage of the Cloud Operating Model
It's critical to pick a delivery strategy that has the right mix of resources and assets.
Capability Development of Skill Sets
Financial institutions can build knowledge by hiring resources with the appropriate skill sets. This architecture gives you the freedom to choose the optimum resource pool for your specific needs.
Virtual Captive
This concept establishes a dedicated pool of specialists or centers to assist with cloud operations and demand management. It's a great option to completely outsource everything.
Vendors Who Provide Outsourcing Services
Offshore centers, facilities, and resources from third-party providers manage activities in this operational model. It combines resources and investments to provide services to a variety of banks.
Conclusion
Financial institutions should choose service and delivery models that best meet operational flexibility, cost reductions, and pay-as-you-use models when planning cloud computing projects in the near future. Customer relationship management and corporate content management are examples of low-risk programmes. Projects involving core company functional systems, such as wealth management or core banking, will be more risky. Private clouds are likely to become a more popular deployment paradigm for cloud computing among banks, providing them complete control over their cloud systems through ownership and operations.
