How Financial Service Firms Are Capitalizing on the Cloud
On the whole, the business world has abandoned on-prem software, storage, and operations in favor of the flexibility, scalability, and cost-effectiveness of the cloud. Though a handful of industries have remained cautious about full cloud implementation, even the remaining holdouts are dropping their reservations.
The financial services sector is a great example. Apprehensions about incompatibility with federal regulations, cybersecurity frameworks, and latency requirements have kept financial services firms tethered to on-prem solutions. Now, innovation to cloud capabilities has minimized most of those concerns.
As a result, more stakeholders in the financial services industry are drawn to cloud-based solutions. A survey conducted by 451 Research found that the majority of financial organizations are now on the cloud bandwagon:
- 43% are in the discovery, trial, or testing stages of cloud modernization
- 26% are in the early production stage
The remaining challenge is to find use cases that are proven, taking your business down a well-trodden and cost-effective path rather than blazing a new trail into unproven territory. Thanks to our own experience and our observation of the market, we’ve put together a list of quick wins for cloud computing in financial services.
Enhance Your Operations
Whether you acknowledge it or not, your organization is in an efficiency arms race. The competition gains the advantage the moment they are able to effectively harness solutions that enhance their deliverability, foster greater collaboration, or slash expenses. Though on-prem software and servers can advance your operational efficiency in some of these areas, progress is typically achieved through stuttering starts and stops. Even then, entire performance upgrades remain out of reach.
JP Morgan Chase is an example of how the transition to cloud can revolutionize your capabilities. Within the last few years, they have taken a more proactive stance to adopting strategic cloud solutions. In their Annual Report 2018, Chairman and Chief Executive Officer Jamie Dimon discussed cloud in a very sensible and realistic way. He acknowledge his initial skepticism, but noted the significant advancements in the operations of their multinational financial services company:
- The increased scalability and elasticity of their computing capabilities, allowing them to grow their processing capacity exponentially.
- The seamless collaboration of teams, allowing them to continuously reimagine, improve, rollout products and services in a fraction of the time.
- The near instantaneous accessibility of data sets, breaking down on-prem silos and enhancing the analytical capabilities of widespread teams.
Of course, security is still vital. Continued compliance with federal regulations and privacy laws protects your customers from data breaches and your business from million dollar fines. Rather than dismissing cloud as a liability, more organizations are augmenting their security procedures to achieve the best of both worlds.
One strategy that is gathering steam is the zero trust security framework. Rejecting the practice of whitelisting certain users or applications paired with several layers of authentication can mitigate the risk of cyber criminals compromising valuable systems. Financial organizations can even remove the exposure of PII from the picture by creating an access layer on the cloud that is scrubbed of identifying details and leave the raw data in secure on-prem storage.
Improve Your Analytics
The volume of data streaming into financial organizations is astronomical and, if used wisely, can promote greater understanding of consumer behavior, market conditions, and business opportunities. In short, firms with a data-driven approach to their business outperform the competition. For your organization to achieve the necessary comprehensiveness and panoramic view, the cloud is increasingly your only choice.
We can use Jack Ma’s MyBank to make our point. This disruptive lender has created a real-time payment and risk management system that is capable of analyzing 3,000 variables in real-time to qualify small businesses in China for the right loan options – all in about three minutes. The level of computational power necessary to make real-time evaluations would require a massive investment in on-prem infrastructure. As a cloud solution, a system like this is far more economical and scalable.
Organizations that want to explore real-time lending, consumer analytics, risk assessment, or any data science use case will need to harness robust algorithms and consolidate the data into a golden record. Cloud platforms allow for greater flexibility and affordability of these solutions, keeping costs manageable as you expand your insight.
Reinforce Your Fraud Detection
Like most innovations, the advent of mobile banking and digital payments created problems alongside the solutions it offered. Consumers could now access financial accounts and make easy payments online, but so could cyber criminals pretending to be them. As a result, online transaction fraud is predicted to hit $25 billion by 2020. Financial organizations need the ability to analyze and detect fraudulent payments as they happen.
PayPal is one company that is using cloud infrastructure (along with machine learning capabilities) to improve their fraud detection capabilities. They use the advanced machine learning algorithms of their Simility platform. They fed data from internal and external sources into a supervised machine learning model to train it to detect anomalies and fraudulent behavior.
With the ability of the platform to access sophisticated computational power in real-time, this solution has also helped other financial institutions to identify fraudulent bank accounts worth millions. And Simility isn’t the only solution capable of delivering these results. A wide range of cloud platforms are able to enhance the ability of financial organizations in spotting fraudulent activity before it becomes a problem.
And the List Goes On…
In general, cloud computing in the finance sector is changing the ways that business is done – in both expected and unexpected ways. Finding the right cloud solutions is not limited to a one-off selection, but an ongoing process that requires you to keep the pulse of the latest innovations and use cases.
As the extent of cloud software, platforms, and storage broadens, more financial services organizations will need to make a decision: hire internal personnel to spearhead their ongoing cloud performance or work with an outsourced enterprise consulting firm to surmount challenges as they arise. Regardless of your decision, it’s important to work with experts who will guide you down the right path to a quick and definitive ROI.
Eager to get the best from cloud computing in financial services? Reach out to our team to discuss how to transform your business and provide the greatest ROI.