Since the 1960s, a number of computer bureaus compete to provide some technological services to the companies by allowing them to rent a specific time on a mainframe, rather than have to buy one themselves; later, the ‘Time-Sharing’ services have been developed to the rise of ‘Corporates Data Centers’, which enabled companies to store vast amount of data, without the need for the huge investments on servers and storage units.

On the late 1990s and the early 2000s, these revolutionary concepts resurfaced again and again in the shape of application service providers, utility computing, and grid computing, until it was followed by the ‘Cloud Computing’ as it’s known in our current-times.

Since then, the world is still experiencing a rapid increase towards the shift to use of Cloud Computing, while ‘Analyst Gartner’ predicts that half of the companies around the globe will switch to full dependence on cloud computing environment by the year 2021.

WHAT IS CLOUD COMPUTING?

The simplest definition of Cloud Computing is “It is a technology that allows a business to store its servers and data off-site within secure data centers which can then be accessed by users through the internet”

(Ernst & Young, 2019)

In other words, cloud computing is the provision of any / all types of technology services (applications, data storage, data processing, data security, information delivery) over the Internet, through one or more Cloud Service Providers (CSP), so that they can be accessed by the organization itself or its customers anywhere, anytime.

Perhaps one of the most important and common examples of the use of cloud computing are the cloud storage spaces provided by Gmail and Smartphones, which allows the consumers to save their photos and messages on the cloud rather than using the device storage unit; while some of the largest international companies have become providing their full services using cloud technology such as Netflix, which relies on cloud computing services to run video streaming services, as well as its other vital business systems.

CLOUD SERVICE-MODELS:

SOFTWARE-as-a-SERVICE (SaaS):

Where the Software and its related data are hosted by the Cloud Service Provider (CSP), while end-users would be able to access the software from anywhere via their own web browser subject to granted access rights.

The greatest advantage of SaaS Cloud-Model that the software will be compatible with desktops as well as tablets and smartphones, which will ensure the maximum scalability capabilities as the application can be used by unlimited number of users regardless their locations or the devices they use.

PLATFORM-as-a-SERVICE (PaaS):

Where the Cloud Service Provider (CSP) offers a comprehensive platform for applications, interface, DB development, storage and testing; this cloud-model enables the corporates to streamline the applications development, testing them and perform necessary maintenance procedures without the need to invest in the hardware, software or hosting environments.

PaaS provide cost-effective environment for developers that enables them to use a specific programming language, syncs it up with a specific operating system and database on a specific server, thus, the corporate will manage its applications and data, while the Cloud Service Provider (CSP) will take care of other resources.

INFRASTRUCTURE-as-a-SERVICE (IaaS):

This Cloud-Model enables the corporate to buy their exact needs of servers, software, data storage and network equipment without the need for the costly investments on the IT on-premises infrastructure.

IaaS can be used by multiple users as all the computing resources, infrastructure and architecture are in the virtual environment. The resources of IaaS include virtualization, data storage, networking, and servers. These resources are usually managed by vendors while users can manage apps, data, middleware, and runtime.

CLOUD DEPLOYMENT MODELS?

PRIVATE CLOUD:

The cloud environment that is operated and controlled by the organization itself or an authorized 3rd party, while it can be managed either internally or externally. Private Clouds are considered as the most secured environment of all cloud deployment models.

PUBLIC CLOUDS:

In this cloud environment, the users are not required to purchase any hardware or software, as the cloud is made available for public users, while it’s owned and managed by the Cloud Service Provider (CSP).

HYBRID CLOUDS:

This type of clouds environment is composed of two or more environments (Private Cloud / Public Cloud / On-Premises) that each remains unique entitles but linked and integrated with each other, in order to provide the required service, which enables the companies to manage essential applications and keep sensitive data within a traditional data center or private cloud.

MULTI-CLOUDS:

Using multiple cloud services from more than one Cloud Services Provider (CSP). Many businesses can benefit from using various cloud services for greater flexibility.

FEATURES OF CLOUD BANKING:

The cloud is proving to be a superior option to boost capacity to handle data, and is now providing an unrivalled level of agility, security and scalability to banks. For use cases such as data analytics, batch processing and data storage, banks can access the cloud as and when required, which means they can utilize such resources more flexibly and efficiently.

Cloud computing is also enabling financial institutions to achieve considerable gains in efficiency and reductions in costs, as the technology requires banks to pay for only the services they use. Ultimately, this means that for testing new applications, it is much more cost-effective to be done on the cloud than on-premises IT infrastructure (International Banker, 2018).

British Bankers’ Association (BBA), have identified the three key drivers for the adoption of Cloud-Based Services by Banks:

AGILE INNOVATION:

Accessing the cloud can increase banks’ ability to innovate “by enhancing agility, efficiency and productivity”. It can also help banks to reallocate resources away from the administration of IT infrastructure, and towards innovation and fast delivery of products and services to markets.

RISK MITIGATION:

The cloud can help to lower risks associated with traditional technology, such as capacity, redundancy and resiliency concerns. Moreover, the ability of cloud computing to scale can equip banks with more control over issues such as security.

COST BENEFITS:

The cost savings of public cloud solutions are significant, especially given the reduction in initial capital-expenditure requirements for traditional IT infrastructure. During periods of peak customer demand, moreover, the cloud can allow banks to manage computing capacity more efficiently. And when the cloud is adopted for risk-mitigation and innovation purposes, cost benefits arise from the resultant improvements in business efficiency.

Moreover, the scalability of the cloud services enables the banks to scan potentially thousands of transactions per second, which will improve the bank’s ability to explore and identify customers’ wants and needs, which will support effective marketing strategies and enhancing rapid personal offering; On the other hand, it will help the banks to understand the customers’ normal/unusual behavior to confront financial crime such as Fraud and Money Laundering.

LEVERAGE THE CLOUD – MAXIMIZE BUSINESS GROWTH:

Since the rise of Cloud Computing, this technology was promoted as a contemporary cheaper, faster, and more “elastic” alternative to the traditional on-premises IT infrastructure, while vast of banks’ leaders already started to plan on how to leverage Cloud Computing to expand their business opportunities from one side, and to optimize the internal processes and the overall banks’ performance from the other side.

EXPAND BUSINESS OPPORTUNITIES:

  • Leveraging the capabilities of cloud analytics, to produce deeper meaningful customers’ insights, which enhancing banks’ KYC processes to benefit from potential business opportunities as well as safeguarding banks’ assets (Customer Profitability, Customer LTV, Risk Analysis … etc.).
  • Enhance customers’ banking experience, through a sophisticated CRM platform that incorporates vast real-time predictive analytics (Next Best Offer, Churn Prediction, Fraud Prediction … etc.), which contribute greatly to provide distinguished personal banking services.
  • Promote an effective customer engagement platform, by improving the capabilities of banking digital channels that simulate and mimic the human behavior in traditional banking (Chat-Bots, PSOs).
  • Enablement of efficient integration between different banks units through Data-Sharing capabilities, which ensure the standardization and harmony between various banking functions.
  • The ease of creating an efficient Big-Data environment, and taking advantage of the huge capabilities offered by advanced technologies such as Machine Learning, Feature Engineering, Natural Language Processing, Internet of Things, Image Recognition, Voice Recognition … etc.

PROCESSES & PERFORMANCE OPTIMIZATION:

  • Promote the bank’s agility of rapid response to future market changes, by enhance the innovation environment to develop many effective solutions that are compatible with current market conditions.
  • Abandon the enterprise on-premises Data-Center, and maximize the benefits of using the cloud computing environment by being able to replicate data and applications on more than one data center or geo-region.
  • The extreme security standards adopted by Cloud Service Providers along with their track record of securing corporates’ IT assets, makes banks data more secured than being stored within on-premises data centers, in addition to exempting banks from the tension and cost of complying with the information security standards.

Reduce the operational cost, as the banks will no longer need to invest with heavy up-front capital for IT infrastructure, while on cloud environment, the bank can increase or decrease the cost of operation based on its exact needs of cloud services/resources (pay-as-you-go).

GROWTH TRENDS OF CLOUD BANKING:

Despite of vast proofs and evidences of Cloud Computing benefits, some are still arguing on the shift of banks around the world to cloud computing is still modest, due to many concerns related to data security, privacy of customer information, data governance and the absence of laws regulating cloud computing in the banking sector.

That’s remind us when Christopher Columbus set sail for the New World in 1492, when many people at that time believed that earth was flat; Columbus failed to change peoples’ minds or convince them that the earth is round; However, nearly 100 years later, the majority opinion changed when Magellan proved that the world is actually round.

Speaking to the Financial Times in April 2018, Microsoft said it believed that the key to successful cloud adoption in financial se rvices “will be a tight partnership between regulators, financial institutions and cloud providers to ensure that the right frameworks, programs and processes are in place as financial services providers increase their usage of cloud services”  (International Banker, 2018).

According to Forbes, a survey of banks conducted by Accenture found that just 3% of respondents didn’t have a cloud strategy and had not started to think about it. That’s not to say the rest have a mature cloud strategy: Only a quarter of the firms surveyed said they have cloud-based practices and tools with ongoing efficiency measures in place.

However, the Financial Insights estimates that the biggest global banks are saving $15 billion from cloud adoption, cutting technology infrastructure costs by 25% (Forbes, 2019).

On January 2018, the European Banking Authority (EBA) published its guidance on the use of cloud-service providers by financial institutions. The recommendations focus mainly on risk management by identifying specific challenges to banks, including “data protection and location, security issues and concentration risk, not only from the point of view of individual institutions but also at industry level, as large suppliers of cloud services can become a single point of failure when many institutions rely on them” (International Banker, 2018).

Finally, the National Bureau of Economic Research (NBER) published on Oct 2018, a working paper that asserts ‘The growth of cloud computing has its roots, at least in part, in the competitive advantage the cloud offers customers in terms of cost, flexibility, and scalability’ (NBER, 2018).

CONCLUSION:

According to Accenture’s MD, Sergi Calvet, the sooner the banks adopt cloud technologies, the better ROI banks will gain in the near future, due to the growing demand for scalability and global growth in the banking sector, while Cloud Industry Forum, stated that by 2030, ‘a corporate with No-Cloud policy, would be as rare as a corporate with No-Internet policy is today’ (Accenture, 2017).

Therefore, the future of banking over the next decade will become totally different than it looks at current days, due to changing customers’ needs and expectations, which will force banks to start immediately to redefine their strategies towards embracing emerging technologies and remain flexible to adopt evolving business models, in order to be ready for continue Banking on 2030 and onward.

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Author: Ammar Daghlas

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