Traditionally, the financial service industries have been reluctant to adapt to the cloud computing platform citing various reasons.
There were few glitches as the financial services industry is a highly regulated industry that requires strict IT security measures and privacy norms.
These organizations were unable to provide the assurances on time and to the scale which the organizations were demanding.
But lately, many of the financial services organizations are welcoming the move to the cloud with open arms.
Most of them are interested in running customer-facing, mobile apps, and digital applications in the public crowd. But, they are reluctant to migrate the back-end applications such as core banking or payment system.
What is Cloud Computing?
According to National Institute of Standards and Technology, Maryland (NIST), cloud computing can be defined as “a pay-per-use model for enabling available, convenient, on-demand access to a shared pool of configurable computing resources which can be rapidly provided and released with minimal service provider interaction or management efforts.
This model comprises five key characteristics, three key service models, and four deployment methods.
Five Essential Characteristics of Cloud Computing:
The ability to provide, monitor, and manage computing resources as per the need without human intervention.
Worldwide network access
Ability to access the computing services regardless of the location or type of the device.
Sharing of IT resources over multiple tenants and across multiple applications in a non-dedicated manner.
Ability to scale up in quick time and as per the requirements.
Ability to track IT resource for every application and tenants.
Three key Service Models:
Software as a Service (SaaS)
Delivery of applications as a service to end-users, normally through a web browser.
Key Examples: Google Docs, Salesforce, and Oracle Cloud.
Platform as a Service (PaaS)
Delivery of application and development platform as a service, to use, deploy, and manage SaaS applications.
Key Examples: Google App Engine, Microsoft Azure.
Infrastructure as a Service (IaaS)
Delivery of compute servers, storage, and networking services as a service. Virtualization plays a crucial part in IaaS as infrastructure hardware is often virtualized.
Key Examples: Amazon EC2, Rackspace, NYSE Euronext CMCP
Four Deployment Models:
A cloud that is available over the internet to everyone. The provider owns and manages everything.
For Ex: Amazon, Google App Engine
It is available only to the authorized users of an organization.
It is the combination of multiple public and private clouds to overcome the shortcomings of a Private or a Public Cloud.
It is the type of service where several authorized personnel from different organizations can access the services with shared management by all the parties.
These are the challenges financial services organizations face while switching to the cloud.
The compliance issues arise due to lack of clarity regarding the questions like who should be allowed to access the data; what clearance level does that person have or how they will be maintained.
Data Security & Data Privacy
Firms are worried about the data being compromised by the vendors on a public cloud. Since financial firms operate on stringent regulations, any loss of customer data will have serious consequences on the reputation of the firms.
The availability of apps on the cloud is a point of concern for most of the firms.
The vendors provide the services on the limited warranty and if the vendor disables some facilities for days in the case of non-payment; it would create chaos and hamper the reputation of the firm.
The advantages of switching to cloud almost negate to zero when the organization decides to switch from one cloud to another because the initial costs would be too high; as most of the cloud service providers give access through web interfaces, command-line tools, or through the proprietary APIs.
Benefits of Cloud Computing to the Financial Industry
- Cost Savings
- Standardization of Technology
- Data virtualization
Even though the cloud adoption is imminent for all the financial sector just like the all the sectors; there are still some functions or applications which cannot be moved to the cloud such as payment or core banking software.
But the most important thing is many financial services companies have moved to the cloud and most of the companies are on the verge of making the switch towards the cloud.
There are still a few difficulties that need to be sorted out but we feel that the step towards moving to the cloud will be necessary for all the organizations.
You can also read: Top Five Difference between Iaas & PaaS 2018