The Impact Of Cloud Computing On The Banking Sector

The Impact Of Cloud Computing On The Banking Sector

You’ve probably heard that cloud computing is the way of the future, and that assertion is likely to be true. In spite of its problems, cloud computing offers a level of versatility and convenience that was impossible in the past. That being said, it would seem that many in the banking sector are hesitant to embrace this new technology. Big changes always come with uncertainties, so it’s not surprising that this attitude would exist. Let’s talk a little bit about the impact of cloud computing on the world of banking.

The Benefits Of Cloud-Based Banking

From a banker’s perspective, the cloud has a lot to offer. Let’s discuss some of those benefits in greater detail.

Extreme Versatility

Many cloud vendors market their services as being “flexible and scalable.” This is just a fancy way of saying that the cloud is very versatile, and can adapt quickly to changing markets. With a traditional IT infrastructure, any changes made to that infrastructure will probably involve changes to the physical equipment. The cloud doesn’t have that problem.

The size of a cloud network can be altered at any time to suit the needs of your business. Whether scaling up or down, there is no need to buy new servers or eliminate your existing servers. Once again, everything is digital, so those limitations go out the window. Many businesses also like the fact that the cloud can be accessed from anywhere, eliminating the need for issued devices.

No Maintenance Downtime

Every network goes down for maintenance once in a while, but most cloud services can still provide continuity of service during these times. When you go with a cloud provider for your business, you no longer need to do as much network maintenance. Those things have been outsourced to someone else.

As a result of this, cloud networks tend to experience very little downtime. Of course, cloud outages do happen, but they don’t tend to happen very often. As a result, most businesses say that they experienced a reduction in maintenance downtime after switching to the cloud.

At the same time, it is important to remember that a cloud provider isn’t always to blame when these problems occur. Network downtime can occur as a result of problems with your computer, router, ISP, etc. When we add this factor to our calculations, we find that cloud-based services will probably experience much less downtime.

Low-Security Applications

As you will see in the second part of this article, most of the biggest concerns with cloud computing are security concerns. The actual risk will vary, but cloud computing can be useful in spite of these concerns. After all, you don’t have to use cloud computing for all your computing, now do you?

Many banks choose to use the cloud for low-security applications like email management, human resources, customer help-desk interaction, and a whole lot more. Banks carry out a lot of operations on a day-to-day basis, and not all of them are high-security operations. According to this survey, about 88% of banks use cloud services for low-security purposes.

Reduced Costs

One of the most frequently cited reasons for a business to move to the cloud is the potential for savings. Any time you can cut your costs without cutting down on quality, you have probably gotten a good deal. Because cloud services usually come with a monthly fee, this might sound like a strange thing to claim.

Although high-quality cloud services aren’t exactly cheap, the cost of maintaining an entire IT department can be even greater. Of course, not everyone sees these cost reductions, so it is important to use your cloud service in a cost-effective way. To get the cheapest service, you need to follow this guide and scale your business up and down as needed.

It should be noted that you still need one or two IT people. Even though the cloud handles most of the maintenance for their network, they cannot be held responsible for problems that arise from your network, PC, device, or router. Thus, you will need a couple of people to keep that equipment in good working order.

Protection Against Data Loss

Unfortunately, digital data is not always the most permanent thing in the world. Many of us have, no doubt, experienced personal computer crashes in which important personal documents were lost. Now then, imagine that same kind of problem on a much larger scale, and you can understand another reason that many companies choose the cloud.

You should always back up your most important business data, and it’s best to use multiple backups for maximum security. In this regard, the cloud functions as one more way to ensure that your data is not lost. Should your computers crash, you will normally be able to restore your entire system using a cloud-based backup image.

An Extra Layer Of Encryption

As you might expect, security is of paramount importance here. Bank accounts are easily one of the most appealing targets for cyber-thieves, so a bank needs all the protection that it can get. For this purpose, encryption is one of the most useful and effective weapons in your arsenal.

Encryption works by scrambling your data so that it cannot be read. Using your password, the computer generates a decryption key that is able to rearrange your data back into its original form. Because the key is generated by a password, the encryption cannot be broken without obtaining this password.

Banking networks should already be using the strongest encryptions, but the best protection comes in layers. For one example of this, you might look at the anonymity software known as TOR (The Onion Router). Like an onion, it consists of many layers, each one encrypted and separated from the others.

By encrypting all of your data before it goes into the cloud, you can ensure that no one else is able to read its content. Even if someone does manage to steal your data, they will find it to be useless.

Concerns With Cloud-Based Banking

From a banker’s perspective, the cloud also comes with some serious risks and concerns. Let’s talk a little bit more about those concerns.

The Risks Of New Tech

One of the most frequent concerns with cloud-based banking is the risks that are often associates with new technology. Let’s not forget that cloud computing is a fairly new invention. It was first conceived in the 1960s by a computer scientist named Joseph Licklider, but cloud computing has only become common within the last few years.

With new technology comes new risks, and there is no way to get around that fact. This might be the number one reason that many banks are slow to embrace the cloud. When you are dealing with large amounts of money on a daily basis, you can’t afford to take unnecessary risks. When most of that money belongs to someone else, these risks become all the more pressing.

According to this study, only about seven percent of all banking institutions have moved their services to the cloud. There is always a natural hesitancy to embrace new methods, and we can see that at play here.

Security Concerns

Banks obviously need a lot more security than the average person, and this is also true online. With that in mind, it is easy to see why some banking professionals are suspicious of the cloud. When you first hear about the idea, it sounds insane to put all that sensitive data in a cloud, at least from a security-minded point of view.

It all comes down to one thing here: Trust. Cloud services are not necessarily any less secure than normal computer networks, but you do have to place a lot of trust in your cloud provider. Because banks have to deal with a much larger risk of theft and fraud, they would need to create their own cloud to achieve true security. The creation of a private cloud has become a lot easier, but many people still find it easier, cheaper, and safer to go with a traditional IT structure.

Even if your cloud provider is completely trustworthy, you could still have problems. A cyber-attacker might learn that your bank uses cloud services, and adjust their attack vector accordingly. Instead of trying to hack the bank (which would probably be very hard), they hack the cloud provider instead. Unless your cloud provider has the best security practices, this risk is a large one.

Lack Of Data Control

This one relates to the security problem but is a little more specific. Many people are concerned that they will not have full control over what data is placed in the cloud. For banks, who have to be a little more cautious, this is a serious concern that will often cause them to reject the cloud altogether.

When you store all your information offline, it is easier to control access to that information. Without an internet connection, a data thief or other intruder would have to physically access your computer. Of course, it’s not as convenient to do things this way, and it’s not realistic to think you can avoid the internet when doing business in the modern age.

According to McAfee, this is the number one largest concern that many companies have with cloud banking. Normally, banks control access to everything very tightly. This includes everything from an individual account to the vault itself. The cloud, in spite of its advantages, does reduce the ability of banks to control data access.

Increasing Complexity

A lot of people like to keep things simple, especially where security is concerned. When things are simple, there tends to be a lot more transparency in the system. That might be why some people have an automatic tendency to reject cloud computing. As this technology grows more and more complex, it could become harder to manage.

This problem results from the fact that cloud computing is on the “cutting edge” of new technology. This technology still has a lot of room to grow, and it isn’t clear in which direction it will grow. Unfortunately, it seems that many new issues will arise from the need to incorporate diverse networks into a unified cloud. Anytime you attempt to combine so many unlike things, you are bound to have some problems.

Many people complain that cloud computing has become far more complicated than it once was. For a clue as to the reasons behind this change, this article from the Wall Street Journal might be enlightening.

Based on this article, we can see that many companies are trying to combine cloud computing with their traditional IT infrastructure. Because all of these IT infrastructures are different, there are bound to be compatibility issues. The article cites a survey from 46 CIOs, finding that 27% of them planned to create “hybrid arrangements.” Another 32% said that they intended to create a modified private cloud using multiple cloud providers, which carries a whole new host of compatibility issues.

Conclusion

As you can see, cloud-based banking is becoming more and more popular. In spite of a certain natural unwillingness to change, you can bet that this type of online banking will become a lot more popular going forward. From the earliest days of DARPA net, the internet has been bringing us closer together, and cloud technology is the next natural step.

At the same time, there are definitely some problems with this new idea, and these will have to be ironed out before cloud computing can fulfill its maximum potential. At present, we would say it provides convenience and can save you a lot of money. At the same time, you will still need a few IT professionals to manage your interaction with the cloud.

The security issues, obviously, will need to be addressed before cloud computing can become common in the banking sector. We hope that you have enjoyed this article and that you will fill out the contact form to receive more interesting and informative articles like this one.