Cloud Computing in Banking in 2022: Challenges, Benefits, and Solutions

As the global economy continues to recover, banks are continuing to develop new strategies to ensure they are positioned for sustainable growth. In this study, CompatibL maps out the challenges, benefits, and solutions that will be the driving factors for banking in 2022, as cloud computing steadily gains traction with banks that are looking to increase their efficiencies and reduce IT costs by moving away from their aging infrastructure.

While fintech companies are responding to the increased demand for cloud solutions, the banking industry continues to embrace cloud technologies and banking cloud software to manage the enormous amount of data the industry produces daily. With customers generating 2.5 quintillion bytes of data every day, banking and financial services spend over $67 billion on cloud services per year, with their overall IT spending growing steadily.

Source: celent.com

As the world has moved further into the digital age, business and technology are no longer separate entities. The implementation of cloud computing in banking is not only an improvement on legacy system capabilities, vastly increasing the speed of data processing, but also a way to cut infrastructure costs and to simplify configuration, security, and meet compliance challenges. However, how the cloud is to be used in the financial sector will directly affect both how these challenges are met and the benefits the cloud provides in 2022.

The Cloud in Banking, 2022: Challenges

Even though many of the threats the banking industry faced in 2021 due to COVID-19 have already been eliminated by implementing custom cloud banking solutions, some inherent challenges will remain well into 2022.

Historically, one of the main obstacles to implementing cloud computing in banking has been ensuring data security. It is believed that data is safer in a physical on-premises data center than in a private cloud. However, in reality, the physical location of data was less relevant than access and associated controls for many high-profile security breaches.

Another challenge arises from the supposed immaturity of cloud computing technologies in banking. Even though the notion of cloud computing has its roots way back in the 1960s, it only saw a rapid spread in 2006, and was adopted in banking even later. In 2022, it will be important to combine the best cloud banking solutions with the right strategies.

We need to confront the lack of knowledge. Traditionally banks have preferred to carefully evaluate all the advantages and disadvantages of cloud computing solutions before implementing any of them. Banks have also been also reluctant to make fundamental changes in their operations without putting together the whole picture of all related risks, time frames, and prices. For example, it takes a cloud adoption strategy from 12 to 24 months to be implemented, which may cost a bank upward of six figures a year. On the other hand, the reluctance of banks to entrust data processing to cloud software may cost them even more with increasing competition in the digital jungle of 2022.

 

Seamless integration of new technologies has always been a challenge for large-scale banking enterprises that have a complex and well-established operational infrastructure. With the right solutions, quick integration is easily achievable through cloud-native architectural design and the help of a first-class provider team that will flawlessly manage the integration.

Embracing the cloud is no longer an option, it is a necessity. But keeping full control over IT services, especially when managing complex multi-cloud environments, may also be a challenge. For banks to stay competitive in 2022, it is important to evaluate which services or applications can benefit from being moved to the cloud, determine the risks of transition, minimize service outages, and work toward achieving a greater transparency of IT processes.

To maintain compliance with numerous banking regulatory requirements, cloud banking solutions must support the latest regulatory frameworks, e.g., Basel III, FRTB, ISDA, SIMM, IRRBB, and SA-CCR, and be frequently updated in line with upcoming guidelines. This may still be a challenge for smaller companies that cannot afford to adjust their IT infrastructure to the changing regulation in a timely manner.

The Cloud in Banking, 2022: Benefits

More and more businesses are turning to the cloud as a way to compete and stay relevant and futureproof. Whether you are looking to transform your business, reduce costs, or become more agile, you should align your IT strategy with your business goals. As risk is an integral part of any banking business, the implementation of cloud computing in banking will help ensure that a bank maintains operational capabilities even in the most complex and fast-paced economy-driven environments.

Quick response to volatile conditions: the ability to respond quickly to volatile market conditions improves market and credit risk management capabilities. Whether for running calculations or maintaining operational processes, the advantages of cloud computing provide a bank with the ability to react to market changes faster and always be one step ahead of competitors.

Accurate and reliable predictive modeling: this enables banks to predict outcomes more accurately based on the larger volumes of statistical data that cloud-native computing banking technology can process.

Improved development agility: cloud computing for banks helps to alleviate the high pressure that developers experience in the agile environment and to increase the transparency of their code, which generates value for the product owner. The right cloud banking solution promotes innovations and increased efficiencies and ensures a faster time to delivery.

Reduced management overheads: moving to the cloud can reduce operating costs due to the ability to anticipate critical success factors, analyze overhead activity, and rebalance resources in a timely manner.

New revenue opportunities: the cloud is a powerful tool that enables banks to combine, integrate, and analyze all their data simultaneously, regardless of its source, type, size, or format. This allows a bank to generate the insights needed to respond to a wide range of business challenges, and to identify and explore new potential sources of income.

Maximized cybersecurity: the top cloud banking solutions are heavily protected from DDoS attacks, have security protocols in place to protect you from data breaches, and maintain enhanced infrastructures for compliance, with 24/7 support to ensure the bank is always online.

Driven by the combined positive impact of all these benefits of cloud computing, we believe the banking industry will continue to successfully position itself as one of the growing industries in the adoption of cloud strategies and solutions in 2022.

Cloud Banking Solutions: Banks’ Cloud Strategy for 2022

The cloud now lies at the heart of the digital transformation for many industries, including banking. Overall spending on cloud computing in banking is projected to increase in 2022, with the proliferation of IT-related investments and even more financial organizations relying on cloud services provided by external vendors.

Many banking organizations have already moved to the cloud, allowing them to scale more quickly and achieve levels of agility that would not be possible with traditional on-premises IT infrastructures.

The benefits of cloud computing for banks include more effective operations, reduced IT costs, and extremely secure data. If you are considering migrating your systems or applications to the cloud, then you need an expert by your side. We are here to help you.

How CompatibL Cloud Platform Can Help you Shape Your Bank’s Cloud Strategy

We can help you determine whether cloud hosting is right for your business, and we will work with you to make a plan that fits your goals. But first, consider getting a demo of our award-winning CompatibL Cloud Platform, named best platform in 2020 and 2021.

What is CompatibL Cloud Platform?

CompatibL Cloud Platform is scalable and cost-effective open-risk banking cloud software for conducting analytics, predictive modeling, strategic planning, risk management, and enhanced BI.

For many years, CompatibL Cloud Platform has been the foundation of a cost-effective and widely available next-generation financial architecture for many financial institutions. The flexibility and customization options the CompatibL Cloud Platform provides empower any financial organization to satisfy their own unique mix of requirements.

CompatibL Cloud Platform allows seamless integration of new technologies and can be deployed in your data center or private cloud, as well as in most public clouds, including AWS and Azure. When deployed in the cloud, it leverages the latest serverless cloud technologies.

CompatibL Cloud Platform is a modern and robust cloud computing risk management tool for banking and financial institutions with traditional and serverless parallel computing, a powerful HTML5 front-end with advanced BI, the ability to integrate your analytics written in C++, C#, Java, or Python, and a back-end-agnostic database adapter for most traditional and cloud databases.

The CompatibL Cloud Platform is delivered as a customized solution and can be fully integrated with your trade, market, and reference data representation formats.

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With CompatibL Cloud Platform, your data and data processing operations will always be carefully protected, since we provide one of the most secure cloud banking solutions. This level of security is achieved by using only reliable cloud technologies and strictly adhering to the established regulatory standards in banking.

*For more detailed information on cloud computing in banking, read the Cloud Adoption and Risk Report by Risk.net, supplemented with a Q&A with Siarhei Niaborski, CompatibL’s Executive Vice President of Risk, which highlights how banks benefit from using cloud technologies.