Cloud adoption has reached critical mass, with roughly 90 percent of businesses employing its technology in some facet of their organization. The cloud presents opportunities for enhanced efficiencies and flexibility – without any security trade-offs – so it’s no surprise we’re seeing more organizations shift to the software as a service (SaaS) model. But while we’ve seen the healthcare, legal and insurance industries evolve, banks have been more reluctant to adopt new technologies built outside of their own walls.
The Holdup with Banks
The banking industry is not known for being nimble. As one of the oldest, largest and most vital industries in the U.S. economy, banking has, in some ways, fallen victim to inertia – relying on traditional technologies and internal networks to disseminate its services. This is in large part due to the widely-held belief that on-premise solutions are inherently more secure than the cloud because data lives in proprietary servers and systems, rather than a service provider’s environment. However, research shows that cyber attacks affect both environments, with on-premise users experiencing over twice as many web application attacks as service provider customers, on average.
Still, for many banks, the perceived risks of the cloud outweigh its forecasted benefits. In fact, 73 percent identified security concerns as the main reason for avoiding it, while 63 percent listed privacy issues as their top worry. That perception is beginning to change, as the cloud’s business advantages have become too significant to ignore. A recent study found big banks are expected to grow from as little as zero percent public cloud adoption to 30 percent by 2019 – a dizzying adoption rate for an industry that still relies on legacy systems from the 1960s.
For those still wary of making the switch, here are three of the biggest benefits of moving to the cloud:
Cloud technologies boost your security in ways that on-premise systems are unable to. Traditionally, to use a new offering, you install an on-premise server into your datacenter. Then you must configure network, firewall, and secure access to the server. This stretches resources by increasing training requirements, and ultimately, detracts from the goal of the offering. Due to economies of scale, cloud companies can own the server, the networks and the processes making the entire offering more complete and secure.
With strict protocols and security certifications like SOC2 and ISO2001 built into many services, banks can ensure the cloud is accessed and enabled securely for any solution provider they work with.
Understanding the value of security and the benefits that cloud technology brings to banks, a handful of institutions are leading the shift and others are expected to follow. Capital One, an early adopter of Amazon Web Services, has steadily built its infrastructure in the cloud over the past two years. The company continues to work closely with AWS on specific security and data protocols, allowing the company to operate more securely in the public cloud than it could have in its own data centers, according to Capital One CIO Rob Alexander.
2. Efficiency and Scalability
The cloud enables teams to be more agile than ever. The flexible SaaS model gives teams the opportunity to receive iterative feedback on-demand. This access to real-time commentary empowers teams to ship updates more quickly and frequently and to push the envelope so they’re constantly improving products to align with what customers are looking for.
By leveraging the cloud to store complex data, organizations can meet ever-evolving regulatory compliance and governance rules mandating data protection. A recent example would be financial institutions working to comply with the EU’s General Data Protection Regulation. The ability to meet regulations can be sped up by a number of the cloud’s features, including built-in auditability for more clarity around your compliance status, and virtual infrastructure that reduces room for error.
On top of addressing infrastructure models, the cloud allows businesses to be elastic. For instance, being able to address the mass amount of credit card purchases on Cyber Monday and expand for that specific demand, rather than having to buy new servers to address the one day-per-year demand.
3. Overhead Cost Savings
Switching from on-premise to cloud can mean significant savings on overhead costs.
When you work with a SaaS provider, you no longer need to invest in proprietary infrastructure. Instead, you’re able to access and maintain your data through your partner’s established environment. This cuts down on both the up-front capital costs associated with hardware and the continuous costs that eat up budget to keep hardware and software optimized and refreshed.
Rather than pay a flat fee to keep systems up and running, cloud providers offer a variety of metered, pay-per-use options. These include Salesforce and Microsoft Office 365’s pay-per-seat, AWS’ infrastructure as a service (IAAS) pay-per-hour model and Oracle’s high integration fees.
By outsourcing services to the data center, you can also realize savings on staffing. On-premise technologies can require a team varying in size from one to dozens, depending on the company size. Because your cloud provider takes on the computing, your internal team no longer has to worry about hardware refreshes or server and software updates, freeing up their time to focus on what matters most: your business. Cost savings can also be reinvested into the business to increase headcount, boost wages and drive product innovation.
Cloud technology has already been embraced by businesses in numerous industries, but banks have been slower to acknowledge its benefits. Now, as cloud’s positive impact on security, efficiency, and cost come to the forefront, it’s becoming harder for banks to ignore the advantages. Already, we’re seeing early adopters reap the benefits, from a financial standpoint and innovation perspective, and in the coming years, we can expect to see banking in the cloud transition from a “nice-to-have” to a business-critical approach to moving up in the market.