Introduction
With increased information, transactions, payments, and financial records being processed by banks, the banking industry has been significantly evolving due to advances in technology. Conventional banking systems have been built to meet the needs of traditional banking, however, many businesses struggle to keep up with demands of modern banking. Cloud computing and big data are becoming a key part of the banking industry. Cloud computing provides scalable storage capabilities, processing power and flexibility to manage lots of data. Big data can also be used to help financial institutions gain valuable insight from its data. Overall banks can benefit from using cloud computing and big data by increasing efficiency, decision making, digital banking, and provide a better response to customer needs. Below are 10 key ways cloud computing and big data are changing modern banking.
1. Improve Data Storage with Cloud Data Warehouse
A key way cloud computing is changing modern banking, is by improving the ability to store and manage data. Banks have large amounts of data to process from transactions, mobile apps, online banking, loans, and payments. Storing this data in a traditional system can be costly and difficult to scale. Using a cloud data warehouse means banks can store, organize, manage, and analyze structured data in a more flexible manner. Data can be collected from various departments to allow authorized staff members to view the relevant data. This shows just how much cloud computing can help with the modern day data management. Using solutions like cloud-based data warehouses can help reduce storage issues facing financial institutions.
2. Scalable Storage
Cloud computing means banks can scale their storage capabilities. Financial institutions need to keep track of transaction history, customer information, payment details, documentation, and other important data. If banks are reliant on physical servers to store their data, this can cause some issues. Adding more hardware can be costly, difficult to install, manage, and maintain. Using a cloud based storage system means banks can easily scale up or down their storage capabilities. This can be especially useful during busy periods, such as salary payments, festive periods, and big promotions. During these times banks can easily have more storage available, rather than investing in extra infrastructure which may not be used as much. This also helps ensure data is well organized for financial institutions.
3. Process Large Amounts of Data with Distributed Computing
Banks can use distributed computing to manage large amounts of data. This works by sharing computing processes across various connected servers. This can be very useful in modern banking as financial institutions will need to process thousands or millions of transactions. Banks can use distributed computing systems to analyze transaction patterns, detect suspicious activity, calculate risk, and generate reports. Using a cloud platform means banks have access to computing capabilities which can work together. This means banks don’t need to have all the computing equipment, they can just use the cloud when needed. This can increase the speed of processing which helps provide more insight to financial institutions. This can also help increase the responsiveness of banking applications and help manage increased data.
4. Store Data in Centralized Data Lakes
Another key change to banking with cloud computing is data lakes. Unlike traditional databases, data lakes are much more flexible. They can store large amounts of structured, semi-structured, and unstructured data. Banks can use data lakes to store transaction history, customer feedback, website activity, mobile banking, documentation, and other types of data. This can help banks analyze their data in more detail. For example, if banks want to investigate why customers are unhappy, they can look at their transaction history, customer complaints, and mobile app feedback. Data lakes also allow banks to perform advanced analysis and machine learning. As they have access to a variety of data they can create predictive models. Having centralized data lakes means financial institutions can have easy access to information.
5. Increase Flexibility with Hybrid Cloud
Whilst there are many benefits to using cloud computing, not all banks will be able to fully move into a public cloud. Financial institutions may use traditional banking systems and have sensitive data to store. Using hybrid clouds can help overcome this issue. Hybrid clouds combine private clouds, public clouds, and on premise systems. This means banks can keep highly sensitive data within a controlled system, whilst using public clouds for less sensitive data. This can help banks create more flexibility with their different types of data. It also means banks can gradually update their infrastructure. As long as there is good integration and security controls, hybrid clouds can help banks strike a balance between innovation, requirements, and data security.
6. Speed up Digital Banking with Cloud Native Applications
Cloud native applications are designed to run on a cloud system. They are becoming increasingly important due to customers wanting banking services to be accessible via their mobile devices, websites, digital wallets, etc. Cloud native applications can provide customers with banking services such as account management, digital payments, transaction alerts, customer verification, and reporting. They also provide flexibility to update individual parts of the application. For example, banks could introduce a new payment alert feature, or update their customer verification process. Using cloud native technologies such as containers and microservices makes it easier for developers to test, implement and maintain their applications. This helps financial institutions implement digital services more easily.
7. Provide Easy Access to Data
Cloud computing helps provide easy access to financial information for authorized banking staff. Traditional banking may have information stored in different databases and departments. Using a cloud based platform can help combine information and provide centralized access. Bank managers can use business intelligence tools and analytics dashboards to view transaction volumes, customer activity, revenue, and weaknesses. For example, regional managers can compare branch performances using up-to-date information. Big data can also be used to help with this. It can help find patterns and correlations which you wouldn’t see in traditional reporting. Overall this helps with making informed decisions, helping departments work together, and responding to new opportunities.
8. Improve Disaster Recovery
Disaster recovery is very important for banking. Customers may not be able to access their banking, make payments, or receive important services. Hardware failure, cyber-attacks, natural disasters, and errors can all cause issues with banking systems and important data. Using cloud computing can help improve business continuity. Banks can back up, replicate, and recover data across different geographical areas. Important data can be backed up in secure cloud environments. If the main system fails, disaster recovery can help ensure banks can still provide customers with important services. Cloud systems can also help automate backups and disaster recovery testing. However, a clear recovery time objective, recovery point objective and testing should be in place.
9. Improve Security, Data Governance, and Compliance
Security and compliance are major factors to consider when implementing cloud computing and big data. Financial institutions will have sensitive data such as customer information, account details, payments, etc. Cloud systems can provide various security features such as encryption, identity and access management, multi-factor authentication, monitoring, and automated threat detection. However, these should be properly set up and banks should know what their responsibilities are when using third-party cloud providers. Data Governance is also very important. Financial institutions need clear policies in place regarding how data is collected, categorized, accessed, stored, shared, and retained. Some data may also need to be stored in certain areas due to compliance. Banks should also consider what data protection laws, financial regulations, auditing requirements, and contracts apply to their organization. Regular security checks can help ensure accountability.
10. Overcome Issues with Migrating to the Cloud
Migrating traditional banking systems to cloud systems can be complicated and costly. Many financial institutions will rely on traditional systems which were created decades ago. This can make them difficult to migrate. When migrating data, banks must plan carefully, mistakes, incompatible applications, and poor data management can cause issues with essential banking. Costs, staff training, reliance on vendors, cyber security, and service disruptions should also be considered. Ensuring data remains accurate can also cause issues. To overcome this, financial institutions can gradually move to the cloud by starting with less critical applications. They should also ensure systems are compatible, set clear goals, thoroughly test applications, and train staff. Carefully planning the migration can help banks modernize their operations.
Conclusion
Overall, cloud computing and big data are transforming how modern banks manage information, provide services, and utilize technology. Using cloud data warehouses, scalable storage, distributed computing, data lakes, hybrid clouds, and cloud native applications can help financial institutions manage increased data more efficiently. They can also help provide more flexibility, improve business intelligence, and increase data access. However, financial institutions must also consider security threats, compliance, Data Governance, costs, and limitations. By taking a strategic approach to cloud computing, banks can create a more flexible, secure, and efficient infrastructure. As digital transactions increase, and customer expectations increase, cloud computing and big data will remain a key aspect for modern banking.
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