Cloud computing in Fintech has emerged as an emerging trend which has shown impactful results in financial sector requirements and has given it a massive opportunity to grow. The global market size of the Fintech sector is expected to grow to $124.3 billion USD by the end of the year 2025 at an annual compound growth rate forecasted to be 23.84 per cent.
Even as an increasing number of personal and professional transactions are happening in the digital format, it has become important for established brands as well as Fintech startups to provide their customers with better services which include speed, reliability, and security which is possible through cloud computing as it makes the storage of large and important data well secured and analysed.
Cloud computing has been enabling businesses to access a cost-effective solution for data storage and sharing options, with added benefits of secure storage, interoperability, scalability, and 24/7 uptime. For the fintech sector, this comes with an added benefit of being able to operate across platforms/apps, and also to create customised experiences for clients across the globe.
Some of the key cloud computing developments that are shaping the fintech sector are as mentioned below:
1) Geo-redundant cloud data centers
Unexpected disruptions like storms, power outages, or hardware failure might stop regular business operations, resulting in downtime and data loss. By allowing businesses to effortlessly migrate vital applications and data to one of the geographically distributed secondary locations, geographic redundancy will help businesses preserve operational continuity in the event of calamities. In order to be able to easily transition to a secondary location in the event that your primary site fails or becomes inaccessible, it is important to ensure that IT systems and applications that require high availability have geo-redundant setups.
2) Regulatory compliance
Regulations pertaining to the banking sector, such as PCI DSS and PCI 3DS, are in effect for all cloud service providers. Following the minimal security requirements set out by PCI DSS enables financial institutions and consumers to guarantee that the risk of loss from fraud and cyberattacks is kept within acceptable bounds.
3) Self-service applications
Without cloud services, it could have been challenging to manage the financial data given its exponential growth. FinTech businesses are now able to store and manage data in a secure and reliable manner thanks to cloud technologies. It also enables businesses to use clever techniques for loans, payments, and fraud prevention. It offers a highly secure platform, advanced engineering, and configurable services that enable businesses to provide outstanding customer service.
4) Ease of deploying managed machine learning
A key component of predicting financial trends is the use of machine learning algorithms in businesses. The usage of ML algorithms by FinTech businesses can help them forecast market risk, spot potential business opportunities, lower fraud, etc. Large volumes of data, including financial transactions, loan repayments, company shares, customer interactions, etc., may be used by businesses to train their machine learning models.
5) Cloud Native
Instead of creating whole new environments for application development, cloud-native enables the business creation of micro services which helps in reducing vendor lock-in and increase in portability. Fintech organisations are able to innovate, roll out new services quickly, and continuously provide pleasant experiences regardless of the volume of traffic hitting their systems because to the flexibility of cloud-native applications.
6) Quantum computing
Quantum computing in the fintech sector is increasingly being acknowledged for solving critical problems like cybersecurity, where it plays an important role in safeguarding customers’ financial data using next-gen cryptography; financial data encoded with quantum cryptography is highly secure than the present levels of digital security.
The risks involved in cloud computing in fintech are mentioned below:
1) Data security
A major worry for the Fintech sector is identity theft and data breaches. To protect the payment system, fintech businesses utilise one-time passwords and other authentication techniques. Hackers still succeed in breaking into these systems, stealing financial and personal data. Because cyberattacks are becoming more sophisticated every day and it is difficult to provide total security in the digital world, financial institutions have always run the danger of data leaks.
To protect the security of shared sensitive information, financial services businesses must adhere to a number of standards and laws. Compliance is a significant problem for fintech businesses since it calls for the deployment of stringent security procedures to ensure that there are no gaps that hackers may exploit. Aside from that, compliance must not come at the expense of software and application performance. While certain restrictions apply uniformly to all financial institutions, others are particular to the business’s industry—for example, lending and borrowing, insurance, financial advice—and are thus only relevant to certain types of financial institutions. Financial institutions risk severe fines if they don’t comply.
Fintech businesses have understood how cloud computing’s agility potential might help them dominate the sector. Partnering with an expert in the field can further help fintech companies and businesses in not only optimising their solutions but to also gain an edge over competition through customised innovation. Further, extending its influence by developing and providing cutting-edge products and services, Fintech companies can leverage cloud computing to establish seamless client contacts, and increasing business revenue.
Views expressed by: Sachin Nigam, CTO & Co-Founder, Goavega Software Pvt. Ltd