Cloud Banking Opens up a World of Digital Possibilities
IBM explains its cloud storage as a way to enable “applications to upload data to a network of remote, connected servers” accessible from anywhere. Amazon says that, “Instead of buying, owning, and maintaining physical data centers and servers, you can access technology services, such as computing power, storage, and databases, on an as-needed basis from a cloud provider like Amazon Web Services (AWS).”
The claims are heady. But banks are cautious. Is the cloud the answer to explosive digital product growth or is it a leaky storage unit for a bank’s most valuable data assets?
The advantages of cloud storage for financial institutions
With its massive capacity, the cloud offers forward-thinking banks the opportunity to run applications requiring computing capacity far beyond what they likely own.
“Banks seeking to improve their competitiveness will need to evolve their strategy of how cloud can enable the bank’s digital transformation. The cloud offers a way for banks to quickly develop new applications and add new services, helping fend off challenges from competitors and remain super-relevant to customers. And data-intensive applications such as artificial intelligence (AI) and complex data analytics — both increasingly important to banks — are typically cloud-based.”
Steve Culp, Forbes
Small- to medium-sized banks, in particular, see the cloud as a way to level the playing field with banks with large-scale computing resources. Internet-based computing and storage offer a number of other benefits to financial institutions.
- Cost: No need to buy, establish, and maintain hardware, software, and data centers
- Speed: Computing and data is available instantaneously, with no capacity concerns
- Global: Dispersed data centers make computing available anywhere, anytime
- Performance: Offers the latest technology and the largest capacity
- Reliability: Redundancy for faster, cheaper data backup and disaster recovery
- Security: Broad set of security policies, technologies, and controls in place
Is cloud banking secure?
In the spring of 2019, a misconfigured firewall on an Amazon Web Services cloud server led to the exposure of social security numbers and linked bank account numbers for nearly 106 million of Capital One’s customers and applicants, a hack that is expected to cost Capital One $100-150 million in 2019 alone.
Obviously, the cloud is not impenetrable. But its use does seem inevitable.
Yet, some banking experts say the cloud is a business asset no modern bank or credit union can afford to bypass. “It’s become clear that any financial institution relying on a legacy infrastructure cannot compete against faster and more innovative digital competitors.” And banks are expected to spend more than $53 billion on cloud services by 2023.
“Banks that fail to move quickly enough to transition workloads to the cloud risk being overtaken by more agile rivals.”
Scott Hiemstra, BiZTech
The conundrum for banks is clear: Security is key to their success, but modern banking requires massive computing capabilities.
Banks considering the use of cloud storage should pay attention to several things to ensure the greatest possible security for their customers:
- Cloud security begins with an overarching cybersecurity strategy. While banks often see the benefit of the cloud for added agility and product development, a Forbes survey shows that only “one in four has a defined and robust strategy for cloud adoption.”
- Assess the real security of the current, internal network. Is it a patchwork of systems that has vulnerabilities? Would the cloud offer additional continuity and security?
- Understand and consider the benefits of various cloud providers as well as public and private clouds.
- Remain actively involved in cloud storage security. The same security standards banks apply to their internal processes and networks should be applied to the cloud. Banks cannot rely exclusively on the security processes of the cloud provider, particularly in the area of regulatory compliance. Dedicated, experienced bank personnel are invaluable in noticing gaps, irregularities, compliance issues, or other concerns that may arise. The Wall Street Journal reported that before the recent data breach, Capital One Financial Corp. “employees raised concerns within the company about what they saw as high turnover in its cybersecurity unit and a failure to promptly install some software to help spot and defend against hacks… .” Capital One would have done well to listen.
Cloud storage is not impenetrable, but banks armed with a strong leading strategy, up-to-date information, and a computing staff skilled in managing a cloud-based infrastructure can gain a competitive advantage. The cloud allows small- to medium-sized banks to offer the big-bank computing capabilities that today’s customers demand.
Check out our white paper detailing the challenges of financial institutions that you face today and how some of the biggest players are responding.
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