Today, cloud computing is a crucial part of the banking and financial services industry. The American Bankers Association estimates that more than 90% of financial institutions use cloud solutions for some or all of their banking operations.
However, despite the widespread adoption of cloud computing in the fintech space, most banks are still reluctant to move all their assets to the cloud. 10% of institutions reject cloud computing, mainly due to financial constraints and data insecurity.
Nonetheless, banking institutions using hybrid cloud banking have reported significant progress in a number of areas of their business. Let’s talk about hybrid clouds and how banks could use this technology to their advantage.
Typically, hybrid clouds are used in the banking industry to orchestrate and govern application portability to provide a consistent and flexible distributed computing environment for easy scaling.
How hybrid cloud infrastructures are benefiting financial services providers
Banking institutions can take advantage of hosting their application in a hybrid cloud environment in the following ways:
Adopting a hybrid cloud strategy for digital retail banking infrastructure will help prevent and minimize the potential damage to the bank’s reputation and finances.
Financial institutions can reduce the risk of data breach by using a private cloud environment for sensitive information and a public one for other records.
Meet regulatory standards for data governance
Financial companies can legally handle customer data by using hybrid clouds. Banking is a highly regulated industry and every application must meet a variety of regulatory criteria.
However, a hybrid cloud solution bank can store sensitive data on its own private server in accordance with data processing and management standards by hosting an application on commercially acceptable public clouds such as AWS.
Implement new approaches
Many financial organizations manage service portfolios that contain legacy applications that do not allow for the addition of new features or components. You may end up finding it difficult to make changes to the current architecture as some older software can be too difficult to update.
However, it is possible to transfer and upgrade your traditional banking infrastructure to a cloud environment that is part of a fintech platform running hybrid cloud solutions.
(CI/CD) Maintaining continuity
Hybrid clouds have accelerated developments in the banking industry by ushering in the era of challenger banks and other disruptive fintech products. And continuous integration, delivery, deployment and development makes this possible.
This allows fintech teams to develop faster and meet deadlines without delaying the ongoing process. A hybrid cloud architecture could also be used to host, test, deploy and secure critical processes.
Improve user experience
The user experience is greatly improved when the core infrastructure is flexible and always available. Few network disruptions and downtimes affect the applications and services while they continue to run.
When banks deploy hybrid clouds on edge servers, network latency is also reduced. Most importantly, information from a hybrid banking cloud can help financial services firms better understand their customers and develop strategies to increase customer satisfaction.
Accelerate time to market
Continuous integration and delivery, as already noted, increase the rate of innovation. Because it reduces the time it takes products to reach the market, this crucial capacity is important in the highly competitive business. In addition, you can update the product after deployment to fix issues or add new features.
Reduce IT costs
IT costs will drop dramatically for applications in a hybrid cloud environment. Remember that faster time to market means fewer iterations of testing, development, and deployment. This can help you reduce expenses, especially when using a time-and-material approach.
Additionally, most cloud providers use a pay-as-you-go billing approach, allowing you to only pay for the resources you actually use, rather than paying exorbitant prices for unnecessary features.
Separate data silos
Despite the fact that a hybrid cloud divides infrastructure into many storage environments, new cloud solutions include features that banks can use to consolidate their data and eliminate siloing.
Increase scalability and flexibility
Because of their versatility, banks and other financial organizations can rely on hybrid clouds. With no network disruption, they can scale operations to meet growing demand. This allows banks to grow their business while maintaining high standards of service and customer satisfaction.
Hybrid clouds help banks reduce unnecessary spending, which increases overall revenue. In addition, financial institutions can increase the productivity and efficiency of their processes by identifying operational redundancies.
Best practices for hybrid cloud implementation in banking
While there are many benefits to using a hybrid cloud for banking, improper implementation can be detrimental to banks and financial services providers. Let’s take a look at the ideal methods for putting hybrid cloud into practice, some of which we at SDK.finance are using for our latest development – the Hybrid Cloud Fintech Platform.
Use reliable providers
Banking institutions can use private clouds for application and network infrastructure if they can afford the security and maintenance costs. Alternatively, they can manage data-intensive financial activities using the resources of reliable providers such as Amazon Web Services (AWS), Microsoft Azure, Google Cloud, SAP, etc.
Maintaining interoperability with historical systems and even modern cloud tools has become difficult due to the proliferation of different cloud technologies. The following strategies can be used to keep hybrid cloud banking infrastructure interoperable:
- Implement open cloud standards.
Your cloud infrastructure should conform to IEEE interoperability criteria, even if there are no universal operational standards, to avoid incompatibilities.
- Use adapters as a barrier between multiple cloud systems.
These adapters save costs by eliminating the need for an additional data center to merge legacy systems with modern ones.
- Modernize your current architecture.
Legacy systems can coexist with hybrid clouds, although it’s preferable to upgrade them to improve efficiency.
Consider vendor lock-in when switching platforms
Some cloud service providers “lock” their products, making them incompatible with other cloud assets. When choosing a cloud provider to replatform your traditional banking infrastructure, prioritize providers that support interoperability. This allows you to move to a hybrid cloud without worrying about extensive toolset changes and compatibility.
Establish a rigid system of governance
A digital banking governance strategy should include policies for cloud services. This ensures that a company as a whole is aware of its corporate goals.
A strong approach to cloud governance also improves data security by ensuring that all deployments, integrations and testing comply with defined internal regulations. Teams can then identify and assess risk indicators before they impact financial services.
To completely eliminate insider risk, banks should implement access management to restrict access to confidential information.
Include tests at every level
The success of any hybrid cloud depends on ongoing testing, beginning with the transition from the on-premises architecture and spanning the life of the cloud environment.
Companies that offer financial services like virtual banks or cloud wallets need to test their systems to ensure all parts are working properly.
Banks must continuously review the efficiency of their hybrid cloud infrastructure as part of governance and testing. Consider the following when deploying a hybrid cloud in banking:
- Exposed Endpoints
- Response Period
- crash frequency
- network requests
Monitoring the performance of private and public clouds is possible using tools such as Google Operations, Azure Monitor or CloudWatch.
Because it offers financial service providers the necessary flexibility and scalability, the hybrid cloud is now part of the banking industry. Working in a hybrid cloud environment can protect your data from unauthorized access thanks to the sophisticated security infrastructure and encryption mechanisms.
Banks and other financial institutions can use a hybrid cloud banking solution to manage operations, update their infrastructure and comply with regulatory standards. Most notably, they can customize the user interface and connect custom solutions to public cloud servers to ensure a smooth, hassle-free customer experience.