We’re all on the cloud these days. It has become ubiquitous in our everyday lives, hosting our files, enabling our communication, and for many of us, powering our banking.
Yes, even the legacy banks now realise the benefits of cloud-based core banking systems. The cloud means you can cut out expensive server infrastructure, reduce maintenance, and even make it easier to build and release new features much faster than before.
But the cloud has often been the province of those small, nimble, flexible fintechs that have long understood the value it brings. This value is particularly noticeable in emerging markets where physical infrastructure is relatively underdeveloped, and where cloud-based core banking systems can deliver financial services to the unbanked.
These are some of the key benefits of being cloud-based:
Flexibility and speed
The level of flexibility the cloud offers is game changing, particularly for smaller fintechs and financial services providers. For instance, cloud tech enables a small bank in the Philippines to access cutting-edge tech and a low cost of entry, and allows it to flexibly and quickly scale as it sees fit.
In addition, if your business is designed to scale in the cloud, you can deploy quickly and easily on any cloud provider. This is known as being “cloud agnostic”, and it is essential to staying nimble and flexible, no matter which provider is hosting you, whether that’s AWS, Azure, or Google.
A truly independent core banking system can work on any cloud service provider.
This flexibility is a critical issue for any lender, as it provides for extremely fast product development, testing and launch timescales. This means a small business can pivot quickly to capitalise on new markets as they emerge.
With the cloud, you do not have to invest in expensive servers or other physical infrastructure, nor do you have to spend hefty sums on maintenance, storage space or security patches. This, in turn, means your financial institution doesn’t require a dedicated team to manage these concerns, freeing up capital to invest in talent or other areas of your business.
Furthermore, the cloud can scale or decrease depending on your business’s needs. You only ever need to pay for what you require, so there’s never any need to pay for excess provision when you’re only using a small portion of it. For a small, rural bank, for instance, this will significantly reduce costs when compared to using physical server infrastructure.
Different jurisdictions have different data security and privacy standards, but it’s a consumer common concern all over the world. This is especially important for a core banking system, where a customer data breach can lead to severe financial, reputational and legal consequences.
The cloud generally offers a greater level of information security than on-site infrastructure, where most major data leaks take place.
The security benefits offered by the cloud is particularly evident when comparing a public to a private or community cloud.
A community cloud, for instance, which is what Oradian’s platform can provide, is a kind of private cloud infrastructure that can be shared by several organisations. These rely on private servers that can be restricted to certain individuals and organisations, therefore offering significant security benefits compared to a public cloud.
Resilience and recovery
The lack of physical infrastructure makes cloud banking much more resilient to major disruptions.
This means it can accommodate a surge in usage without crashing, for instance, by providing more potential capacity than more limited physical infrastructure.
The cloud also offers benefits in areas prone to extreme weather events, earthquakes, tsunamis or volcanic eruptions, physical infrastructure is a major risk. A natural disaster could totally destroy servers, wiping out data in an instant.
A cloud-based system would ensure availability of data and applications as soon as a network connection was re-established, making the process of disaster recovery much swifter.
The cloud is no longer simply “nice to have” – it has rapidly become an essential part of the banking ecosystem.
For fintechs, independent banks and Microfinance institutions in emerging markets, it offers enormous value, helping them deliver services to remote or poorly served communities, and truly scale their offering. As a tool of financial inclusion, it is second to none.
To find out more about the value of cloud-based finance, contact Oradian today.