How the cloud is transforming financial institutions

Published January 27, 2021

Financial institutions stand to win by platforming for a digital-first world


Even before the pandemic, financial institutions were starting to move their platforms to the cloud. Indeed, according to Toolbox, 19 of the 20 major U.S. banks have announced public cloud initiatives. As Albert Welgraven, Microsoft’s financial services industry director in Western Europe, recently said, “The cloud is changing everything. And the current crisis has accelerated this change and continues to do so.”

So, what’s driving the accelerating of cloud computing for FIs? While there are many reasons, there’s one answer: digital. Consumers want on-demand, frictionless access to their financial services—on any device, at any time, for any reason. And that demand is here to stay. That means FIs that don’t adopt a digital-first approach to their infrastructure will be outmatched by the FIs who do. See how Harborstone unified their digital banking processes to meet customer needs faster.

What’s the end goal and why does legacy technology hold FIs back?


Even for industries outside financial services, digital-first technology is enabling three main objectives: simplicity, accelerated innovation and greater agility. And that's the goal and promise of the cloud: To remove complexity in the consumer experience while integrating and delivering the latest features and functions to meet changing demands as quickly as possible.

But if you’re running a legacy platform, you’ll face a few obstacles on your way to “simple, innovative and agile,” such as:

  • Siloed technology that makes integrations difficult
  • High cost of ownership due to maintenance, support and upgrades of outdated systems
  • An inability to cheaply and quickly roll out new features and services
  • Being slow to meet changing compliance regulations

With today’s unprecedented pace of change, the need for speed and agility are making legacy and proprietary systems a thing of the past in the banking industry—while making the benefits of cloud computing more alluring than ever.

Cloud computing offers unrivaled benefits for the digital-first age


In the process of meeting increasing banking demands, FIs can benefit from moving to a cloud platform in a number of ways that tie into value creation—innovation, controlling costs and increasing operational efficiency often top the list.

The European Banking Authority defines cloud computing as “a model for enabling ubiquitous, convenient, on-demand network access to a shared pool of configurable computing resources that can be rapidly provisioned and released with minimal management effort or service provider interaction.”

Agility is key: Respond quickly to changing markets for more innovation and growth


No one was predicting the pandemic and the effects it would have on industries around the world—but speed took on a whole new meaning as businesses made significant changes to keep up. It’s never been more important to make rapid adjustments. And that’s where the cloud comes in.

Without cloud adoption, what would it take for your FI to add a new mobile experience that lets your customers send money to anyone, any time? Or move more teller transactions to self-service ATMs or ITMs? Or implement new contactless ways of authentication...or any number of rapid changes?

With legacy and proprietary systems, it might look something like this: You and your IT manager meet to decide how many new servers you’ll need, where you’ll buy them, how much you can budget and check to see if you have the IT space for them. Then you’ll need to purchase the servers, have them delivered, then get them installed, configured, tested and deployed. Then you have to duplicate development across all your channels and back-office systems, depending on your setup.

That all takes a lot of time, resources and money. But with the cloud, you can add innovations overnight with fast adoption across your entire enterprise. Just imagine the time you’ll get back. That’s time to focus on other priorities. Time to plan your evolving digital strategy. Time to let all of your customers know you have the services that they want—plus the innovation to back it up.

Reduce your core costs


According to Financial Insights, the biggest global banks are saving around $15 million from cloud computing adoption, cutting technology costs by 25 percent.

The most obvious way to cut costs is offloading the need to spend money on new servers (and other hardware and software)—plus you and your staff don’t have to manage them—you can leave that up to your cloud provider. That way, costly technology “surprises” are limited and you’re freed up to focus on other areas of your business, like improving the customer experience and finding other ways to reduce costs.

The ATM also gets a big overhaul with the cloud. In fact, Mike Lee, chief executive officer of the ATM Industry Association says, “It’s no exaggeration to say we’re entering a new era for ATMs.” The cloud is ushering in that new era with a host of benefits, including reducing an FI’s total cost of ATM ownership by easily integrating into other channels, like mobile. 

Other cloud computing cost-savers include:

  • Reducing your electricity bill and carbon emissions
  • Minimizing onsite repair and upgrade costs
  • Eliminating data storage 

Increase banking operational efficiencies


The scalability that comes with cloud adoption can enable FIs to adjust operations quickly, so you can handle more volume without adding extra staff or capacity. Or, if it’s a slow period and you want to do just the opposite, you can; the cloud delivers that flexibility and visibility.

And then there’s the matter of data security, which is always top of mind. Scalability can also bring greater data protection. “From a regulatory perspective, moreover, the scalability of the cloud means that banks can scan potentially thousands of transactions per second,” reports International Banker, “which dramatically improves the industry’s ability to combat financial crime, such as fraud and money laundering.”

“The scalability of the cloud means that banks can scan potentially thousands of transactions per second, which dramatically improves the industry’s ability to combat financial crime, such as fraud and money laundering.” —International Banker

And the way redundancy works with the cloud, through an intricate network of data centers, servers and disks, it supports “always on” data uptime and better application performance. That can make a big difference in operational efficiency. With no downtime, interruptions to business operations are limited so employees can make more transactions—and self-service banking is never down. 

Other cloud computing operational efficiency benefits include:

  • Automation that simplifies the banking compliance process, which makes keeping up with it more manageable and much more efficient
  • Data analytics that automatically and systematically give you insights into your business so you can make changes as they arise  

For a while it may have seemed like FIs, with their need to protect sensitive data, would always be too wary of the cloud to make the move. But the truth is that cloud security has increased. And thanks to the many benefits of cloud banking, so has the number of FIs now moving to the cloud so they can better position themselves to meet the demands for digital-first, frictionless, multi-channel customer experiences—and do it with less cost, resources and time.

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