Banking in the Cloud Is the Future, So Get Ready for It
Recent finance reports have revealed that governments around the world, including the U.S., may be pushing banks to move the management of their services toward cloud-based servers in order to save money.
Understanding the benefits of cloud computing, like the convenience of always-on access to information, is easy. While some banks have been hesitant to use cloud hosts because of security concerns, the long-term benefit in cost efficiency should be a net positive. Research firm IDC reported only a year ago that CIOs distrusted public clouds for “mission-critical” work.
But this attitude is changing. Dr. Tyrone Grandison, the CEO of Proficiency Labs International and an expert in cloud computing for financial institutions, says banks are traditionally averse to rapid change. Financial institutions will move toward cloud systems — it’ll just take years to go through systematic checks and balances, he says.
“I expect the banks, when hiring firms or using in-house IT teams, will be doing due diligence. They will perform a small incubated project involving a task that is not mission-critical to assess the implementation impact and iron out any hiccups. If all that is positive, then [perform] a staged, full deployment across their enterprise,” Grandison says.
The Value of the Cloud
One of the economic benefits of using the cloud is the reduced need for dedicated IT staff. Flexibility of personnel without long-term investments improves efficiency, and banks could see savings because they’re purchasing hardware and software, receiving automatic upgrades and scaling services only as they need them.
As both sides figure out the right arrangement, cloud hosts should expect to provide different levels of transparency and access, depending on bank requirements. Some banks, Grandison says, will “require Quality of Service (QoS) assurances and access,” which, in practical terms, means banks will look to cheap cloud providers that can fully concentrate on specific needs. And that means web hosts need to reassure banks of the security, privacy and accountability controls that will make the cloud the “bedrock of their infrastructure” work.
Quality of Service in the Cloud
QoS indicators should include performance, availability, data quality and query-execution factors, Grandison says.
For performance, the bank might require the cloud provider assures the response time be within a range, such that all requests must respond within five milliseconds. For availability, the bank might require data always be available (‘100% uptime’). For data quality, the bank might require that all data is free from corruption or malware.
The availability and QoS requirements should lead to cloud providers “replicating data in multiple places and building retrieval systems that are fault-tolerant.” And finally, the bank may require financial controls, where the economics surrounding the ability of the cloud provider to scale up or down are stable and won’t result in billing spikes.
The Leap of Faith to the Cloud
Although there’s optimism, banks do face risks in moving to the cloud. The biggest danger is what Grandison calls “analysis paralysis.” It’s an overreliance on the banks’ due diligence. IT decision making and deployment is famously fast, and acting on a severe need at the slow pace of the average bank may make them vulnerable to competition, so setting short-term deadlines for analysis and decision making is important. Other risks include skewing priorities toward short-term investments instead of through client hierarchy and losing control of data.
Concerns about data security are legitimate. For example, an investigation by the European Union‘s data-protection group revealed Dutch banking giants ING and Rabobank drafted a plan to sell customer data to companies looking to use it for ads.
What do the customers of financial institutions gain from a shift to the cloud? Users may receive improved services in the form of web-based applications that use instantaneous data. A bank, for example, may alert a customer by phone of potential cash-back returns from a vendor (like a grocery store) the moment they step inside the business. These kinds of cutting-edge, interactive applications will make the difficult process of moving to the cloud worth it.