Cloud computing is not a new technology but its implementation in the recent times is ushering tremendous transformation in the way business is carried out in the banking sector. This technology is helping in creating a flexible, agile business model to meet the demands of the dynamic and competitive landscape with cost efficiency and giving rise to a bundle of opportunities for the conventional as well as the non-conventional financial entities, writes Rashi Aditi Ghosh of Elets News Network (ENN).
Banking on Cloud
Digital ecosystem surrounding the financial institutions today is exploding at a never seen before pace. There are two reasons responsible for this growth- firstly, rising customer preferences towards customised banking and secondly, the strong penetration of technology.
Banks are now seeking to transform their services, products and offerings in a bid to reflect the changing customer preferences.
Cloud computing is playing a very strong role in this paradigm shift in terms of the banking and financial institutions.
According to Capgemini- A global leader in consulting, technology and outsourcing service, Cloud computing is expected to be one of the fastest-growing technologies in the years to come.
It further revealed that business applications will have the largest market for cloud-related services and spending. This will happen with a gradual transition from on-premise to cloud-based services especially for general business applications like customer relationship management (CRM) and enterprise resource planning (ERP).
“As Information Technology infrastructure contributes to a significant part of the operational costs of banks, Cloud technology provides cost benefits, scalability and many more benefits to the banks. Banks have started adopting Cloud technology to derive the benefits,” said Rama Vedashree, Chief Executive Officer, Data Security Council of India (DSCI).
“Cloud is a key platform for mid-sized players in banking sector to accelerate IT adoption, particularly in co-operative and rural banking. It has been noted that the Indian banking sector has already started adopting Cloud for collaboration and communication technologies, Human Resource solutions and payment solutions, and is expected to remain as one of the major domains to adopt Cloud in the future as well.”
Cloud computing can be beneficial for financial institutions for several advantages it offers, some of them are as follows:
- Cost savings and Usage-based billing
With the help of cloud computing, financial institutions can convert a large up-front capital expenditure into a smaller version, on the current operational cost. This transition requires no additional investment in terms of new hardware and software. Further, cloud services also offer the financial services with a unique opportunity to avail services at pay-as-you-go basis.
- Business continuity
Cloud helps the financial institutions in ensuring services such as higher level data protection, fault tolerance and disaster recovery. Cloud computing also provides a high level of redundancy and back-up at a lower price than traditional managed solutions.
- Business agility
Cloud computing allows the businesses in moving its non-critical services to the cloud, including software patches, maintenance, and other computing issues. As a result of this, firms will be able to focus on the business of financial services, not just on Information Technology (IT).
- Reducing Carbon Footprint
Implementation of cloud helps the financial institutions in reducing energy consumption and carbon footprint by setting up physical infrastructure.
Cloud Deployment Models
Service providers commonly deploy clouds in three ways. They are as follows:
Under this model, the cloud infrastructure is solely meant for a specific company. This service can either be managed by the company or a third party and it may exist either on or off the premises. According to the experts, this is the most secure options.
“Private clouds allow more systems to operate at high transaction volumes without loading the network or slowing the process, ensuring better customer experience. They promise cost savings and efficient services by having dedicated resources for each business unit in an enterprise. Since resources are rented instead of purchased, it helps convert CAPEX (capital expenditure) to OPEX (operating expenditure), reducing the total cost of ownership,” said Parag Arora, Vice PresidentFinancial Services, Cisco India.
The cloud infrastructure is operated solely for a specific company. It may be managed by the company or a third party and may exist on or off the premises. This is the most secure of all cloud options.
This particular cloud infrastructure is available to the general public or a large industry group and is owned by an organisation that sells cloud services.
This cloud infrastructure comprises two or more clouds (private or public) that remain unique entities but are linked in order to provide services.
Banking is a regulated industry which, in India, has shown the lead in adopting Information Technology to service consumers and for internal operational efficiency.
“Cloud computing has already made inroads in every industry and lately in 2017, we saw BFSI embracing cloud computing primarily for Email and Collaboration services. We at IceWarp believe there is a huge opportunity for Cloud computing adaption. But the need of the hour is security specialised cloud computing technology such as Private Cloud or Private Cloud Cluster and IceWarp is completely ready with it. Private Cloud or Private Cloud Cluster provides complete security to the customer who wants to implement all Information Security guidelines to use Cloud and also they can extend their existing Leased Lines or Multiprotocol Label Switching (MPLS) connectivity to Private Cloud providing seamless secured access,” said Pramod Sharda, Chief Executive Officer at IceWarp – India and Middle East.
Challenges to cloud
Cloud computing is not a new concept for the banking industry but the sector has shown slow progress as far as adapting to the technology is concerned. These concerns are largely associated with the security of information and data in the cloud and compliance.
“There is a lot of progress in terms of infrastructure in the banking industry for last 10 years, especially if we talk about high-end, tier-4 Data Centres followed by cloud computing,” said Prasanna Lohar, Head Technology IT, DCB Bank.
Few organisations are also facing problem in adapting to cloud due to lack of knowledge pertaining to the significance of this technology.
According to experts,) Cloud Gap is deviating customer’s demand, leading to ‘Perfect Strom’. This is hindering the popularity of cloud and its implementation.
“Cloud computing has its own advantage. According to a research, optimised public cloud strategy will enable 11 per cent growth in the revenue strategy, 87 per cent reduction in provisioning Information Technology (IT) services and 77 per cent reduction in IT cost,” said Saju Paulose, Product Sales Specialist – Datacenter, Cisco Systems India.
“However, many customers do not see the significance of clouds. Only 3 per cent of the customers actually acknowledge it and accept it,” said Saju Paulose, Product Sales Specialist – Datacenter, Cisco Systems India,” he said.
While adapting to technologies like cloud is important for every sector but understanding its fitment in terms of deployment is also necessary.
“Cloud Technology has many pros but it also has a lot of cons. Up-grading the services in sync with the rising craze for technology is important but understanding the emotion of the client and then embracing new services is the need of the hour,” said Goutham KS, Head-IT, Auxilo Finserve Pvt Ltd.
Future of Cloud in BFSI sector
Although cloud and its implementation is slow but its future in the BFSI sector seems to be bright. Not just the conventional financial entities such as Public Sector and Private Sector banks, cloud is frequently gaining acceptance amongst several non-conventional entities like Non-Banking Financial Companies and start-ups.
“It is important to look at the present stature of the market today and then decide the implications of cloud computing in accordance with it. NBFCs, in particular, started to address the issues that the conventional banks were not addressing well,” said Akshath Balachandra, Enterprise Business Development, Amazon Internet Services Pvt. Ltd.
“With these new players entering the BFSI market, the delivery medium is more and more getting into the digital mode. That is where the significance if cloud comes into place,” he added.
Highlighting the role of cloud in terms of the start-ups, Dominic Vijay Kumar, Associate Vice President-IT, Art Affordable Housing Finance India Ltd, said, “Cloud plays a very important role in Startups working in the Banking, Financial Services and Insurance Sector. We, at Art Affordable Housing Finance India Ltd, have hosted a lot of applications on cloud computing. This has helped us in cutting down our capital expenditure and lowering the operating expense and concentrate well on business part.”
Cloud computing might have a slow progress but it’s hybrid approach is going concrete its sustainability in the banking and financial sector.
“Cloud computing is here to stay. What people are increasingly looking for is hybrid approach where they would want to have their core applications running out of their own Data Centres. Organisations are directly buying these services from the cloud,” said Deepak Gupta, Business Development Manager Financial Services, Cisco India.
Cloud Computing despite being operational, struggled to gain acceptance in the BFSI sector. The confusion over its deployment models and security-related issues have hindered its popularity over the years. But with the rising awareness pertaining to this technology and the availability of private and more secured models, the significance of cloud seems is improving with each passing day. In addition to this, it is also important for all the banking and financial institutions to understand the relevance of cloud in terms of their organisational requirement and then implement it.