How To Build A Future-Fit Cloud Banking System?

Cloud Banking – an Introduction:

Cloud banking is a potential game-changer and a catalyst for enterprise business transformation that would be so effective for financial institutions in near future. Basically, it empowers financial institutions to manage core banking platforms and applications in the cloud. On-demand enhanced computing power is provided to deliver digital financial services.

Similar to cloud computing; physical infrastructure, complex technological networks, and provisioning of hardware and software to the financial organization's team are completely managed by a cloud-based system in cloud computing. Cloud is acting as a driving force to digitally transform the banking industry by controlling data especially in providing scalability, agility, flexibility, and security to banks.

Due to its demanding and advanced features, cloud banking industry is progressing at a sound pace. According to Allied Market research, the global finance cloud market to touch $90.11 billion by 2030 thriving at an exponential rate of 12.4% from 2021 to 2030. The following features demonstrate, why cloud financial market is gaining a boost at this rapid stride. 

• Centralized and Unified Approach

• Breaks Down Isolation

• Increased Processing

• Increased Collaboration

• Growth and Scalability

• Cost Reduction

• Enhanced Security

If we talk about different regions where this modern industry is showing its impact, a steady increase has been seen in leveraging cloud technology to offer more digitized, modern, and secured products to their customers. Like 82% of banks in APAC have decided to invest in cloud over the course of 3 years. Similarly, North American and EMEA banks have reached this capacity of 60% AND 83% respectively. Moreover, almost every country’s banks are in line to deploy cloud-based financial solutions to facilitate their customers and fulfill current-era challenges.

Before dipping into modern cloud banking, let's have a look at some traditional computing methods and why cloud-based methods have replaced them. 

These key points are pushing up financial cloud market to a different level as banks need them to sustain and grow.

On-Premises Vs Cloud - Key Differences:

The on-premises computing model consists of an IT infrastructure comprising hardware applications, systems, and software applications any organization owns. The organization has complete servers’ ownership and is responsible for maintaining the whole system. Actually, it is a traditional computing model taken over by cloud computing. One of the key differences between them is owning local storage and physical maintenance of systems. On-premises systems, have less scalability scope where implementation to running of any solution is done internally. System safety and updates are also looked after in-house. When any software requires to purchase, it would be installed on the respective server where database, additional power server, and operating system will also have to manage. No internet connectivity requires to access data in on-premises systems.

Contrary to that, cloud computing method is managed by another organization that has the ownership of servers, databases, storage, and software delivered to customers as per their demands and requirement. Any business organization doesn't require to own hardware, software, additional infrastructure, or license. A cloud computing services provider will manage all those things. Following services are offered while using cloud computing method:

• Computing Power

• Storage

• Databases

As per services model, these three models are commonly used in cloud services:

• Infrastructure-as-a-Service (IaaS)

• Platform-as-a-Service (PaaS)

• Software-as-a-Service (SaaS) 

Cloud Vs On-Premises – a Deep Comparison:

 On-premises and cloud computing both will operate business applications and enable your business operations quite smoothly and easily. However, they have several differences discussed below comparison.

Advantages:

• Cloud:

• High Speed – Quick Deployment: Cloud computing provides quick software development, developers can try their new ideas and develop software architecture without any hurdle of on- site hardware restrictions and lengthy procurement processes.

• Data Security: Due to having advanced security features, data is much more secured here. Granular permissions and access management set restrictions on sensitive data. Moreover, features like authentication, access control, and encryption put an additional security layer to any organization's data.

• Scalability, Data Restoration and Mobility: Cloud services provide scalable solutions where data backup and restoration are great features to use. Mobility provides remote access to any device no matter where you are.

• On-Premises:

• In-hand Data Protection: As on-premises systems are locally controlled, any business organization can keep them secure due to having full control over them. All the sensitive information will be on the company's premises. A company can add extra protection whenever needed.

• LocalAccess: No internet connectivity is required to access the data, if any network problem occurs, employees can still access data within system premises.

• Sole Ownership: Perform configuration, up-gradation, and changes whenever any business organization requires.

Before choosing any computing method, a company’s budget is the first step to define as it will clarify which platform a company can afford to deploy. Let’s discuss some key differences, how these two computing methods vary in this regard.

Cost Comparison: (reference)

• Cloud:

  • No Hardware Investment: Only pay a smaller amount having a monthly or annually recurring fee.

  • Hardware Replacement:No hardware replacement is required as it's not your headache.

  • Pay for What You Use: In cloud, businesses can scale up or down whenever needed. Only pay for the resources you are using.

  • No Cost of Power and Electricity

Majority of organizations declare cloud computing services with less cost as compared with on-premises infrastructure. Here are key points strengthening this statement.

• On-Premises:

  • Need to purchase server licenses which are very expensive.

  •  Hardware needs to replace after every few years because old servers become less efficient and have more chances of failure.

• Once you bought any server, either you use its full capacity or not, a huge amount has been invested in it. So, you don't scale up or down your resources.

• A huge amount is dedicated to dealing with cost of power and electricity in on-premises systems.

For every global service, rules, and regulations are placed to maintain quality, security, and governance as well. Every country has its own governing organization/body but there are some internationally recognized organizations to set standards on cloud services. Let’s discuss those standards.

From the perspective of policy, regulatory compliance, and governance, there are also some major differences when trying to use an on-premises or cloud environment. But when cloud compliances are discussed, there is better overall governance and control compared to on-premises. Let's discuss the key differences.

• Cloud:

As the companies are going towards cloud because of good business operations. There is no law that prevents the adoption of cloud in the world. Before choosing cloud, organizations must need to know in which country/countries their data will be secured/processed/managed. What are the laws for those countries and the impact of these laws on your data? In cloud computing, there are a variety of laws and regulations implemented and confirmed before offering services like data localization laws, data protection laws, and data sovereignty laws.

• On-Premises:

In on-premises systems, The General Data Protection Regulation (GDPR) fits on it to protect sensitive data and respond appropriately to data subject requests. GDPR provides strict regulations for managing, protecting, and purging company data.

Now let's dive into some internationally recognized organizations’ regulations, how they react and define policies when dealing with cloud services. 

FDA Regulatory Compliance Software

FDA regulatory compliance software lies in the technology category to deal with risk management and compliances for organizations in pharmaceuticals and medical devices. This software supports compliance under FDA requirements such as 21 CFR Part 11 and standards like ISO 9001 and ISO 13485. The application must have features like document management, validation/revalidation, digital signatures, change control, document control, data integrity, trails, audit training, and CAPA to be under FDA regulations.

FDA regulatory compliance software can be cloud-based or on-premises, both are supported by FDA policies.

What kind of requirements and certifications are required for a cloud service provider before offering services and which regulations need to follow while managing critical data, below content answering your these warm questions.

Cloud Compliance and Certifications

Cloud compliance defines regulatory standards of cloud usage according to local, national, and international laws and by following industry guidelines. Some notable regulatory requirements include Payment Card Industry Data Security Standard (PCI DSS), Gramm-Leach-Bliley Act (GLBA), and Health Insurance Portability and Accountability Act (HIPAA). When an organization plans to deploy cloud in its business operations, there is always a concern, how cloud computing services providers will assist to keep the company in compliance with laws, like HIPAA in the U.S or Europe’s General Data Protection Regulation (GDPR).

Here are details of some popular certifications companies are obeying while managing businesses data:

1. EU GDPR: This regulation defines rules on data protection and privacy in the European Union and the European Economic Area.
2. CCPA (California Consumer Privacy Act): As per this regulation, information collected over the preceding 12 months by an organization can be reviewed by consumers.
3. PIPEDA (Personal Information Protection and Electronic Documents Act): This Canadian federal privacy law defines regulations on how an organization will control personal information when interacting with any commercial activity.
4. SOC2 (Service Organization Control 2): This regulation defines how organizations should manage customers' data. Its criteria include privacy, security, confidentiality, availability, processing integrity, and availability.

Modular Banking Architecture on Cloud 

A cloud-based banking architecture empowers multi-channel customer onboarding, customer experience, lending, payment, and transaction processing under the usage of AI for decision-making and other business operations. This architecture provides protected and well-secured integration across the whole banking solution. Customers interacting with the bank using 3rd party applications or ecosystem partners are facilitated with the complete and state-of-the-art banking architecture.

A modular banking solution that can transform the traditional banking system into a highly modernized financial platform will assist its customers with a variety of financial tools summed up in a single banking solution. The concept of three C's: convenience, customization, and control has been built by optimizing the modular banking model.