Today, cloud computing is a crucial part of the banking and financial services industry. The American Bankers Association estimates that more than 90% of financial institutions use cloud solutions for all or part of their banking activities.
However, despite the widespread use of cloud computing in fintech, most banks are still hesitant to move all their assets to the cloud. 10% of institutions reject cloud computing, mainly due to financial constraints and data insecurity.
Still, banking institutions using hybrid cloud banking have reported significant progress in a number of areas of their business. Let’s discuss hybrid clouds and how banks could use this technology to their advantage.
Typically, hybrid clouds are used in the banking industry to coordinate and control application portability to provide a consistent and flexible distributed computing environment for easy scaling.
How Hybrid Cloud Infrastructures Benefit Financial Services Organizations
Banks can benefit from hosting their application in a hybrid cloud environment in the following ways:
Adopting a hybrid cloud strategy for retail banking’s digital infrastructure will help prevent and minimize potential damage to the bank’s reputation and finances.
Financial institutions can reduce the risk of data compromise by using a private cloud environment for sensitive information and a public environment for other records.
Meet regulatory data management standards
Financial companies can legally manage customer data using hybrid clouds. Banking is a highly regulated industry and each application must meet a variety of regulatory criteria.
However, a hybrid cloud solution bank can store sensitive data on its own private server in accordance with data processing and management standards by hosting an application on commercially acceptable public clouds like AWS.
Implement new approaches
Many financial organizations manage service portfolios that include outdated applications that cannot accommodate the addition of new features or components. They may end up finding it difficult to make changes to the current architecture, as some legacy software may be too difficult to upgrade.
However, it is possible to transfer and upgrade your traditional banking infrastructure to a cloud environment, part of a fintech platform that leverages hybrid cloud solutions.
(CI/CD) Maintain continuity
Ushering in the era of challenger banks and other disruptive fintech products, hybrid clouds have accelerated developments in banking. And continuous integration, delivery, deployment and development make it possible.
This allows fintech teams to grow faster and meet deadlines without delaying the ongoing process. The hybrid cloud architecture could also be used to host, test, organize and back up important processes.
Improve user experience
The user experience will be significantly improved when the basic infrastructure is flexible and always available. Minimal network disruptions and downtime will affect applications and services as they continue to operate.
When banks deploy hybrid clouds on edge servers, network latency is also reduced. More importantly, insights from a banking hybrid cloud can help financial services companies better understand their customers and develop strategies to increase customer happiness.
Accelerate time to market
Continuous integration and delivery, as already established, increases the rate of innovation. Because it shortens the time it takes for products to get to market, this crucial capability is important in the highly competitive industry. Additionally, you can upgrade the product after deployment to fix issues or add new features.
Reduce IT costs
IT costs will drop significantly for applications in a hybrid cloud environment. Consider that a shorter time to market means fewer test, development, and deployment iterations. As a result, you can reduce expenses, especially when using a time-material approach.
Additionally, the majority of cloud providers use a pay-as-you-go approach, which allows you to pay only for the resources you actually use rather than paying exorbitant fees for unnecessary features.
Separate data silos
Despite the fact that a hybrid cloud divides infrastructures into multiple storage environments, new cloud solutions contain features that allow banks to consolidate their data and prevent silos from forming.
Increase scalability and flexibility
Due to their versatility, banks and other financial organizations can rely on hybrid clouds. Without encountering network interruptions, they can adjust operations to meet growing demand. This allows banks to grow their business while maintaining a high level of performance and customer satisfaction.
Hybrid clouds help banks reduce unnecessary expenses, which increases total revenue. Additionally, by identifying operational redundancies, financial institutions can increase the productivity and efficiency of their processes.
Best Practices for Implementing Hybrid Cloud in Banking
While there are many benefits to using a hybrid cloud for banking, implementing it incorrectly could harm banks and financial service providers. Let’s take a look at the best ways to put hybrid clouds into practice, some of which we at SDK.finance use for our recent development – the hybrid cloud fintech platform.
Use reliable suppliers
Banks can use private clouds for application and network infrastructure if they can afford the security and maintenance costs. Alternatively, they could manage data-intensive financial activities using the resources of trusted vendors, like Amazon Web Services (AWS), Microsoft Azure, Google Cloud, SAP, etc.
Maintaining interoperability with legacy systems and even modern cloud tools has become difficult due to the proliferation of different cloud technologies. The following strategies can be used to maintain hybrid cloud banking infrastructure interoperability:
- Implement open cloud standards.
Your cloud infrastructure should meet IEEE interoperability criteria even though there are no universal operability standards to avoid incompatibilities.
- Use adapters as a barrier between multiple cloud systems.
These adapters help reduce costs by eliminating the need for an additional data center to merge legacy systems with modern systems.
- Upgrade the architecture you have now.
Legacy systems can coexist with hybrid clouds, although it’s best to upgrade to gain efficiency.
Keep vendor lock in mind when redesigning the platform
Some cloud service providers “lock down” their products, making them incompatible with other cloud assets. Prioritize providers that support interoperability when choosing a cloud provider to reformat your traditional banking infrastructure. This will allow you to move to a hybrid cloud without having to worry about major tool set and compatibility changes.
Establish a rigid governance system
A digital banking governance strategy should contain guidelines for cloud services. This ensures that a company as a whole is aware of its corporate objectives.
A strong cloud governance approach also improves data security by ensuring that all deployments, integrations, and testing adhere to defined internal regulations. Teams can then identify and assess risk indicators before they impact financial services.
In order to completely eliminate insider risk, banks should adopt access management to restrict access to sensitive information.
Include tests at each level
The success of every hybrid cloud depends on continuous testing, which begins with the on-premises architecture transition and continues for the lifetime of the cloud environment.
Companies that provide financial services, such as virtual banks or cloud wallets, need to test their systems to make sure all parts are working properly.
Banks should continually verify the effectiveness of their hybrid cloud infrastructure as part of governance and testing. When deploying a hybrid cloud in banking, keep the following in mind:
- Exposed Endpoints
- Response time
- Frequency of accidents
- Network requests
Private and public cloud performance monitoring is available using tools such as Google Operations, Azure Monitor, or CloudWatch.
Because it gives financial service providers the flexibility and scalability they need, the hybrid cloud has become an integral part of the banking industry. Working in a hybrid cloud environment can protect your data from unauthorized access thanks to the sophisticated security infrastructure and encryption mechanisms.
Banks and other financial institutions can manage operations, update their infrastructure, and meet regulatory standards with a hybrid cloud banking solution. Above all, they can adjust the user interface and connect custom solutions with public cloud servers to ensure a smooth and stress-free customer experience.