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Banks are moving to the cloud as part of their digitization efforts, more targeted and faster than ever. They are finally transforming from long-held monolithic systems and letting go of concerns about regulatory compliance, security and skills availability, welcoming the transformation and benefits that the cloud brings.
In doing so, banks can leverage the latest cloud-native technologies, coupled with domain skills they have built over many years, to advance in meeting the grand challenges of new fintech companies born in the cloud. They gain access to a flexible and scalable IT infrastructure built on flexible principles that enable them to meet the changing needs of modern banking operations and customers by quickly delivering innovative, personalized offers.
The hassle of overloading during peak seasons will be a thing of the past as the cloud’s dynamic, elastic scalability and rapid capacity provisioning help banks navigate peak transaction loads without compromising the quality or seamlessness of the customer experience. At the same time, the operational costs of infrastructure will undoubtedly decrease with management and maintenance.
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Public or private cloud?
Now that they’ve decided to go cloud, the next question banks face is: which deployment model should they choose? Which works better: single cloud or ploy cloud; public or private?
In a recent cloud adoption study, we found that 41% of banks used a private cloud, while 28% used a public cloud. Both models have their advantages and limitations. The public cloud model excels in situations where scale, flexibility, on-demand computing and elastic scaling are paramount. Latency, governance, data residency, and other areas of compliance can cause issues here.
On the other hand, the private cloud model is the better option when security, control, compliance and customization override other requirements. However, they may experience compatibility issues with certain legacy applications and capacity expansions.
Or a mix of both?
This is one of the reasons why banks are now more prone to a mix of the two models. Even the large and medium-sized financial institutions that previously opted only for private cloud are now open to using public cloud to house their smaller, non-core applications. In the aforementioned study, 31% of respondents used a hybrid approach: a winning combination of on-premise, private, and public cloud models that promises scalability, efficiency, and technology capabilities that stand the test of time.
Here, banks can choose to keep legacy systems, which are not cloud-ready, in place. At the same time, their technology decision makers can craft the ideal mix of applications that can be distributed across private and public clouds, depending on the use-case scenarios most relevant to their needs.
As they make these decisions, it’s also important to evaluate the additional benefits of a multi-cloud arrangement. Banking institutions can mitigate the risk of vendor lock-in and switch between cloud service providers to seamlessly meet business and market requirements. They can select the most appropriate cloud service provider for each workload and have more room to negotiate terms as they have many vendors.
It will also prepare them for the future as regulations are expected to take effect requiring banks to use multiple cloud providers. A 2021 Google Cloud report reflects this mindset shift: 88% of respondents opted for a multi-cloud strategy.
The importance of hybrid, multi-cloud in digital transformation
This approach is best suited for modernization and future-proofing. Still, banks will undoubtedly face complexities that can affect interoperability and seamlessness within the cloud environment. There are inherent challenges, such as the application layer and the data layer being distributed in different cloud environments. Other factors, such as model heterogeneity and the lack of standardized data replication tools between cloud service providers, will also lead to compromised results.
That’s why we recommend banks opt for cloud-native, cloud-agnostic solutions that can easily be pushed into a multi-cloud configuration. This allows them to find the most suitable supplier and data configurations that enable seamless operations. In addition, they can opt for containerized deployments to ensure automated application development that adds to overall efficiency.
There is no question that banks can gain a lot by migrating to the cloud with a hybrid, multi-cloud approach. Rather than going all out on their cloud investment, they should tread this path of change wisely and plan carefully to maximize the many benefits it offers. They can then pursue greater benefits beyond cost efficiency, business resiliency, advanced analytics, and the ability to deploy, automate, and innovate faster.
So armed, they can focus on providing optimal customer experiences while navigating transactional loads en masse.
Kalambur Venkatraman is an experienced technical director who serves as VP of product architecture at EdgeVerve.
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