The cloud era is in full swing. More firms are transferring their infrastructure to the cloud, and a significant portion of a company’s IT expenditure is allocated to pay for cloud services. It’s easy to see why organizations are lured to this relatively new technology because of the benefits, including accessibility, ease of use, and rapid deployment.
It is not different in the case of the financial services industry. Financial institutions are under constant pressure to be flexible and innovative in helping customers minimize transaction risk and maximize their cash position. Faced with shifting consumer expectations, rising technology, and alternative business models, banks must begin planning today to guarantee they are ready for the future. Hence, one does not have to wonder why the cloud is becoming a more prominent focus.
The Rise of the Hybrid Cloud in Financial Services
Financial institutions need to migrate a portion of their infrastructure to the cloud to address several new challenges that include:
- An unexpected spike in card-not-present transactions.
- A surge in the number of credit applications.
- A change in the working environment – work from home.
- The strain on digital channels happened due to bank branch closures.
As a result, the hybrid cloud gained traction and is vital for accelerating digital transformation. Though the shift started after the economic crisis in 2008, the pandemic helped accelerate this change.
What is hybrid cloud?
Hybrid cloud combines private and public clouds. It performs a wide range of tasks, including computing and storage services.
Hybrid cloud has become the default choice for most organizations in recent years since it is the ideal option for businesses new to the cloud and seeking the most satisfactory solution.
Many financial institutions have been transitioning to hybrid cloud in recent years.
- Bank of America and IBM established a hybrid cloud.
- Banco Santander chose Microsoft Azure to drive its hybrid cloud strategy.
- Keybank has selected Google’s Anthos for personalized banking solutions.
As per IDC’s CloudPath Survey conducted in 2020, 89% of banks use or plan to use hybrid cloud solutions. The cloud will host more than half of all banks’ environments in the next 5 years, according to McKinsey & Company’s webinar.
The significance of hybrid cloud adoption by banks
Hybrid cloud has a lot to offer for banks and other financial institutions to keep their customers satisfied and ahead of the competition.
- Storage capacity: Storing the massive amounts of data that banks deal with can be a monumental task. With the hybrid cloud, it’s not. Banks can store all their critical data on-premises and move other data to the cloud with a lesser security risk.
- Data analysis and reporting: The hybrid cloud’s machine learning and artificial intelligence capabilities provide insights on customer behavior, product efficiency, and cross-selling and upselling prospects.
- Dependability: Banks no longer have to be concerned about catastrophe recovery thanks to hybrid cloud. Administrators can instantly launch the application in the public cloud in the case of a disaster because the data is already there.
- Development and software testing: Banks can efficiently utilize Kubernetes services, microservices architecture, and multiple hybrid cloud testing methods to develop and test web and mobile fintech applications. Containerization can make software delivery and testing more predictable.
- Regulatory compliance requirements: Hybrid cloud can help financial institutions comply with evolving regulatory reporting needs across various operating jurisdictions and mine-trade surveillance data to discover anti-money laundering and other fraud issues.
How does a bank benefit from a hybrid cloud strategy?
- Cost flexibility: Hybrid cloud enables banks to manage costs flexibly by shifting from fixed to variable expenses.
- Scalability and agility: Hybrid cloud adoption provides instant, unrestricted expansion and also helps to promote market agility by making it cheaper and faster to test new competitive strategies.
- 24×7 availability: Customers can access services 24 hours a day, seven days a week, thanks to the combination of a private cloud and a public cloud.
- Ecosystem collaboration: Hybrid cloud adoption allows broad communication and coordination with distributors, suppliers, agents, partners, financial advisers, customers, and other stakeholders.
The upsides of hybrid cloud banking are becoming more evident over the long haul. Hybrid cloud gives a firm the best of both worlds. Unless a bank has clear-cut needs that can be fulfilled by only a public cloud solution or a private cloud solution, choosing a hybrid cloud approach is the best way to tap the advantages of both worlds simultaneously.