Harry from FinTech Fusion explores the strong relationship between cloud computing and the finance space. He illustrates how cloud computing has modernized the finance industry, making it more innovative, accessible, and streamlined. If you like his read, check out his newsletter and give it a follow!
Cloud computing has revolutionized the modern world. Cloud computing allows large companies and startups alike to use pre-built resources offered by the cloud provider without the need to spend time and money building them in-house.
By moving their infrastructure and development into the cloud, companies can reduce their capital expenditures and operational costs while quickly responding to changing business requirements. Its availability has exploded since 2000 with the creation of cloud platforms such as Amazon Web Services (AWS) and Microsoft Azure.
It has offered a major boost to the security-conscious financial services (finserv) industry and given companies the ability to scale much faster than before. They can harness AI tools such as AWS Textract or GPT-4 via Microsoft Azure to gain insights into customer behavior and market trends, and to enhance the customer experience.
In this article, we’ll explore the benefits of cloud computing for financial services companies and how it’s changing the way they operate.
Cloud Computing Use Cases and Examples in Financial Services
Cloud computing has a range of use cases across all digital industries but here’s a few examples of how it can help financial services companies:
Data Analytics: Financial institutions use cloud computing to process and analyze large amounts of data quickly and cost-effectively. Goldman Sachs (GS) partnered with AWS at the end of 2021 to offer “a new suite of cloud-based data and analytics solutions for financial institutions.” Known as “Goldman Sachs Financial Cloud for Data” (what a catchy title), it’s aimed at hedge funds and asset managers and increases the power of GS’s front-office analytics tools. This allows clients to integrate their data alongside that of Goldman Sachs using AWS Data Exchange.
Adam Selipsky, then head of AWS but now CEO of the company said:
“Combining Goldman Sachs’ data and over a century of financial services knowledge with the reliability, security, and industry expertise of AWS will reimagine financial services technology and put developer-focused, cost-efficient technologies in the hands of all organizations.”
Increased automation: Using cloud automation allows finserv companies to continuously log and organize data in a streamlined fashion. There are many areas in which automation has significantly improved ROI for the financial services sector.
HR teams can streamline and automate various tasks such as paperwork, document management, and scheduling orientations and training sessions with the help of advanced HRMS solutions.
Innovative technologies like chatbots and website widgets can reduce response time and engage prospective buyers, while lead distribution automation can notify the appropriate officer in your team to help a customer.
Automated lead nurturing is another excellent example of automation in financial services, which allows for targeted engagement and re-engagement campaigns to push prospective customers down the sales funnel. Integration with social media apps has made it possible to engage with customers via email, SMS, WhatsApp, or call from agents.
Customer Relationship Management (CRM): Cloud solutions are being used by financial institutions to streamline their customer relationship management processes. Capital One is using Salesforce’s cloud-based CRM solution to manage customer interactions across multiple channels.
It can help make a lot of tasks more efficient including customer onboarding, lead nurturing, and communication with new hires. As well as offering real-time access to customer data, enabling better decision-making and personalized experiences.
Risk Management: Financial institutions are leveraging cloud computing to manage their risk and compliance obligations. For example, JPMorgan Chase has adopted cloud-based solutions to monitor regulatory compliance across its operations, reducing the risk of non-compliance, a feature known as “Risk as a Service.”
Cloud computing also has the potential to revolutionize emerging financial technologies, such as blockchain and AI. Here’s how:
- Blockchain: Although blockchain development is still relatively nascent, cloud solutions can provide a scalable and secure platform for deploying these applications. IBM has launched a cloud-based blockchain platform, allowing financial institutions to collaborate on shared ledgers securely.
- Artificial Intelligence (AI): AI is set to revolutionize all areas of society in the coming decade and perhaps none more so than finance. A recent report found that over 40% of finance professionals believe that AI will make critical business decisions by 2030. AI development massively relies on cloud computing to train and power the neural networks that make up the AI.
The Challenges of Cloud Computing in Financial Services
Data privacy and security are critical concerns for financial institutions using cloud computing. While cloud solutions can offer many benefits, they also present risks that have to be managed carefully.
One of the biggest concerns for financial institutions is the security of their data. In a cloud environment, data is stored and processed outside of the organization’s traditional IT infrastructure, potentially making it vulnerable to attacks or data breaches. The shared nature of cloud infrastructure also means that a security incident affecting one customer could potentially impact other customers on the same platform.
Regulatory compliance is another area of concern for financial institutions using cloud computing. Depending on the jurisdiction, financial institutions may be subject to a range of regulations that require them to protect customer data and maintain data privacy. Some of these regulations, such as the EU’s General Data Protection Regulation (GDPR), can impose significant penalties for non-compliance.
To address these concerns, financial institutions can take steps:
- Regulatory Compliance: Working to ensure that they comply with relevant regulations related to cloud computing, including data privacy and security requirements. They are also engaging with cloud providers to ensure that the providers have appropriate security measures in place to protect data.
- Risk Management Strategies: Engaging in risk management strategies to mitigate the risks associated with cloud computing. This may involve conducting risk assessments of cloud providers, implementing access controls and encryption measures, and ensuring that data is backed up regularly.
- Due Diligence: Conducting due diligence on potential cloud providers to ensure that they have the necessary security measures and certifications in place to protect data. They are also reviewing service level agreements (SLAs) to ensure that cloud providers are contractually obligated to meet certain security standards.
The Future of Fintech and Cloud Computing
The future of cloud computing in financial services looks promising. The use of cloud solutions is expected to grow in the financial industry, driven by the need for increased automation, scalability, and cost savings. And the use of cloud computing and the technologies it can complement, such as AI, is expected to drive more innovation and disruption in the industry.
Cloud solutions can provide financial institutions with the tools and infrastructure needed to quickly develop and launch new products and services. Cloud computing can be used to create new lending platforms, mobile banking applications, and digital wallets.
Financial companies around the world are racing to expand their services to more people. To keep up with innovative fintech startups and meet the growing demand for efficient, customer-centric services, financial firms are turning to the cloud. Many are adopting a hybrid mix of public and private cloud environments for everything from back-office functions to core processes like payments and credit risk management.
Financial companies that fail to innovate and leverage digital technology, such as the cloud, are doomed. The leaders in this race will be those who can offer their customers unparalleled experiences by harnessing the power of digital technology.
These innovative companies are breaking new ground and modernizing their data centers with hyper-converged infrastructure (HCI) to streamline operations and create their own private cloud infrastructure.
Financial services companies that have shifted to hybrid cloud are demonstrating the importance of modernizing IT to remain competitive and meet consumer needs. According to Thierry Pinart, CTO for Global Infrastructure Group at Société Générale, the private cloud’s capacity to create development environments enables organizations to address their needs and those of their clients more rapidly.
The use of cloud computing is expected to grow in the financial industry, driven by the need for increased automation, scalability, and cost savings. Cloud solutions can also drive innovation and disruption in the industry, enabling financial institutions to better serve their customers and stay competitive in a rapidly changing landscape.
Cloud computing has become a critical component of the financial industry, transforming the way financial institutions operate and serve their customers. Cloud solutions provide financial institutions with the agility, scalability, and flexibility needed to respond quickly to changing market conditions, deliver innovative products and services, and meet the evolving needs of customers.
Cloud computing can also enable financial institutions to leverage advanced analytics and artificial intelligence tools to gain deeper insights into customer behavior, risk management, and other key areas. This can help them make more informed decisions and deliver more personalized services to customers.
Cloud computing has already revolutionized financial services and the internet as a whole. Who knows what the next decade will bring for the cloud industry and its impact upon financial services?