Cloud solutions have the power to make financial institutions more agile, more flexible, and better prepared to meet customer demands. Because of concerns around data privacy and security, many institutions have continued to use private instead of public clouds. But hybrid systems can give banks the best of both worlds.
The benefits and value of cloud solutions for banks have always been clear. Using the cloud helps make financial services institutions more agile and flexible in how they serve their customers. They can respond to customer demand with innovative solutions that use cutting-edge technology faster and more efficiently, scaling up and down as needed. As with any other industry shifting to the cloud, moving solutions and services online can also be hugely cost-effective for the financial services industry (FSI).
But there has always been a hitch for FSI. FSI firms deal with highly sensitive personal data and have a high risk of exposure in terms of financial losses, crime, and direct impact on the economy, all of which makes FSI a highly regulated industry. Harnessing the full benefits of the cloud isn’t easy in a public cloud architecture, where there can be concerns around cybersecurity, regulatory compliance, and location of data.
Hybrid cloud solutions, however, are gaining ground in FSI. They offer all the value of the cloud along with a strategy to safeguard data. They also introduce flexibility and agility in financial institutions’ response to process, data management, and cybersecurity. IDC's COVID-19 Impact Survey from May 2020 showed that 94% of organizations plan to change their long-term IT strategy in the post-pandemic era, including an aggressive push to the hybrid multicloud.
The FSI C-suite is increasingly aware of how cloud solutions can help them meet their customer demands. The cloud gives financial institutions a place to store and harness big data, build and operate next-generation applications, and scale and test solutions. Modern banking applications that allow customers to automatically save from their current account, make budgets, and manage spending intuitively from a smartphone—and much more—are usually cloud-based. FSI firms can deliver market-responsive products quickly, while also increasing insights into customer data and improving their revenues.
Previously, banks and other FSI companies worried about the risks of outsourcing critical processes. They also worried about how they could meet strict regulations about data processing and security while using the cloud. But new advances have changed those perceptions.
First, public cloud providers have improved their own security and compliance strategies. For example, many providers now have data centers in multiple locations, so their users can meet obligations to host data in the same country in which it’s collected. Today, many cloud providers actually maintain a level of cybersecurity that exceeds the capabilities of on-premises data centers. These advances have been recognized by regulators such as the Financial Conduct Authority, which issued guidance on the use of the cloud for FSI firms in July 2016.
The second major change is in the rise of the hybrid cloud. Hybrid cloud solutions marry public cloud benefits with private cloud advantages. For FSI firms, that means harnessing the greater scalability of public cloud solutions, while using the greater system control offered by a private cloud.
FSI firms can choose where to locate data and processing based on compliance and security requirements. For example, they can process and store more sensitive information in the private cloud. A hybrid cloud solution also offers centralized management, which makes it easier to use security measures like encryption, access control, and endpoint security across the whole cloud. Although firms still have a mix of architectures that create complexity and limit visibility on data, automated and centralized tools can help manage security across every architecture.
By providing institutions with more flexibility and agility, hybrid cloud solutions can actually help FSI comply with changing regulations. Education and training are still necessary to remove the biggest risk in cybersecurity: human error. But with a hybrid cloud, organizations can be better protected and secured than they ever were when they managed all data on premises. Hybrid cloud solutions provide digital resilience, and that’s why they’re quickly becoming the right solution for FSI firms looking for all the benefits of public cloud along with improved security and governance.
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Mike Scarola is a Global Technical Strategist focused on Financial Services at NetApp. His primary objective is to set the technical strategy for his customers in the Financial Services vertical. Mike leverages his 20+ years of Storage experience to help his customers with their IT evolution and aligns the NetApp solutions to assist with their journey.
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