Financial Cloud Technology Booming

You can thank Amazon for your more personalized, flexible, fast, and reliable financial cloud technology. Not because they are delivering the end products you enjoy from notable FinTech startups such as Strip and robo-advisor Wealthfront (though that’s coming) but because of their introduction of cloud computing.

Financial Cloud Technology Lowers Entry Barriers

Those familiar with a SWOT analysis for business, quickly grasp why pre-cloud efforts of innovators to enter the financial services arena would either fail, or be bought out by traditional banks and brokerages quickly. Barriers to entry were enormous. Just buying the infrastructure needed to create a competing platform/product was usually the death of a great idea.

Enter cloud computing. No upfront costs required—in fact, at a minimal level (sometimes adequate for target market and product testing) it’s even free! When you consider Steve Jobs, Bill Gates, and Jeff Bezos all started billion (or trillion) dollar companies out of a garage, you see how times have changed.

It seems apropos that each of these 3 “garage junkies” would prepare technology pathways for others to start companies cheaper and more competitive at the beginning than they did.

Granted, it was also extremely opportunistic that AWS began offering cloud services to others in 2006—right before the financial crises. The resulting disarray from bank and brokerage failures, as well as an explosion in regulatory mandates and oversight, created the perfect opportunity to exploit the lower barriers to entry in the traditional financial markets cloud provided.

Having obtained a foothold, the cloud now enables FinTech companies to scale processing capacity quickly up or down to improve performance for customer satisfaction and further compete with large financial institutions. All while effectively managing costs.

Hubris on the part of larger regional and national banks was also a contributor. Many financial leaders felt that startups on cloud couldn’t compete with the heavy investment made in their on-premise data centers.

Jamie Dimon, addressed this in his letter to shareholders in April of 2019 when he wrote, “We were a little slow in adopting the cloud, for which I am partially responsible. My early thinking about the cloud was that it was just another term for outsourcing. I held firm to the view …that we can run our own data centers, networks and applications as efficiently as anyone.”

Benefits Reaped by Fintech Companies from Leveraging Cloud Computing

As more and more financial companies pioneer the path forward and learn from their experience, the cloud is improving—and it is growing at a staggering rate. A fulltime business analyst could be kept busy just discovering, researching and analyzing financial innovations on the cloud. At the same time, there is also a growing challenge with the lack of human resources who understand how to implement cloud effectively and cost efficiently.

As cloud computing drives significant changes across many industries, the cloud market will continue evolving even more quickly. Competition and customer demands are requiring cloud-based companies to innovate faster, better, and more frequently. While all this change makes it impossible to detail the many benefits of cloud, here are seven simple ones that FinTechs have capitalized on.

Clients can be served faster and better

Almost unlimited computing power and easy decoupling of applications (think microservices) offered by cloud improves an organization’s ability to create modular customer-centric services that allow agile and targeted responses to customer needs. Developers are also given better collaboration and strong DevOps tools to deploy faster.

Efficiency is increased

Cloud computing incorporates centralized data management and supports faster data processing. It also offers standardization of machine images, infrastructure, and even account administration. With most business operations closely allied with technology, this allows for reduced complexity and less silo structure. It also enables companies to stay more focused on banking operations, thus providing maximum productivity.

Scalability and flexibility are increased

To begin with, innovation is spared the huge startup costs associated with purchasing infrastructure. With on demand payment options, you pay for what you need when you need it.  Developers can either program on the cloud with serverless tools or they can code it on their PC and upload it (with cloud provided services to help) and then test when needed. In production, more compute or storage capacity can be immediately spun-up as required by customer demand. This provides an effective competitive edge over those with the fixed capacity associated with on-premise deployments.

Reduced operational cost

On-premises data storage can be highly expensive compared to cloud storage solutions—especially with archived data. In addition, increased efficiency, machine images, DevOps templates, and other automations offered in cloud services work to reduce operational costs. Finally, adopting cloud computing reduces overall investment and cost for maintaining servers, infrastructure and resources to maintain the uptime.

Improved client relationships

The benefit of having access to the power of advanced technologies like Data Science, Artificial Intelligence, and Machine Learning without the learning curve of developing and building them in-house is immeasurable. Using refined processes provided by tech leaders from AWS, Google, and Microsoft to perform specialized tasks in customer profiling, credit scoring, and fraud detection can now be achieved rapidly and smoothly through cloud computing.

Achieving Regulatory Compliance

Cloud technology is highly reliable for financial service businesses. Achieving compliance with regulatory mandates regarding high availability, redundancy, system security, and customer privacy, are readily accomplished when adopting a cloud infrastructure—and at a lower cost. It delivers high-level systems for data storage that take advantage of cutting edge technology few banks can afford to match—especially given increased capital demands. Additionally, the data saved in the cloud is encrypted to eliminate hacks and many major security threats.

Conclusion

Financial cloud technology has made it possible for FinTech companies to advance their business models and deliver better services at a lesser cost. Fortunately this same technology is available to traditional banks and brokerages. It has also matured significantly in recent years in its ability to support major “lift and shift” efforts for those with significant on-premise infrastructures. At the same time it easily supports a hybrid model of on-prem and cloud configurations. This allows businesses to launch new initiatives on the cloud immediately without any upfront capital costs, as well as allowing them to maintain control over those components and functions they determine need to remain in-house.