Just as important as having loyal customers, however, is having lean operations. To that end, financial institutions can use cloud computing to easily scale up or down. If a mobile banking application has hundreds of thousands of signups, for example, they can instantly increase bandwidth. And they can do it without upgrading legacy infrastructure since cloud service providers furnish automatic updates with the latest security patches and the newest features.
“Banks and other financial institutions keep an immense amount of data and it’s historically all been onsite,” says Nate Tseng, founder and CEO of WallStreetZen.
“By moving data to the cloud, they benefit from faster access, easier utilization, and less overhead costs.”
Although traditional banks were slow to embrace the cloud computing financial services, expect to see cloud computing and banking collide more frequently in pursuit of the aforementioned benefits. Bank of America, for example, built its own cloud and unlocked $2 billion in annual savings as a result.
Goldman Sachs, meanwhile, has partnered with Amazon Web Services (AWS) to offer analytics and financial data for its customers. And Penn National Insurance moved to a hybrid cloud setup that allows it to configure applications in just 30 minutes.
Smaller, community banks can also harness the power of the cloud to compete with much larger financial technology companies.
Whether banks serve individual consumers, small businesses, or large corporations, the cloud benefits all customers, according to Jim Pendergast, senior vice president of altLINE by The Southern Bank.
“Creating a cloud available to everyone within the community can increase profits,” explains Pendergast, who says their customers can help banks offset the initial costs of moving to the cloud. “Banks can include a small fee into their price for every customer to counteract the high price rate.”
Cloud-based architectures are the beginning for banks that want to modernize. But they aren’t the end. In the race for digital relevance, traditional banks are embracing a host of technologies that will help them reinvent themselves for a new generation of customers.
Contactless payments and digital wallets are two such technologies. The former utilize near field communication (NFC) to transfer payment information between a merchant’s point-of-sale (POS) system and a consumer’s credit card or smartphone without physical contact. The latter are similar. They store payment information and other assets — for example, coupons, loyalty cards, and transit tickets — securely on mobile devices and transmit them to merchants either by NFC or through the web via an app.