As technology has evolved, so has the financial industry. Customers no longer need to rely on brick and mortar financial institutions such as local banks and ATMs to conduct banking services. Today’s banking and financial customers can now transact at any time of day, from anywhere, thanks to online and mobile banking and the rise of cloud computing.
The cloud has also accelerated the rate at which financial service companies can detect potential fraud. Using cloud-based servers, a financial institution has the bandwidth to almost immediately flag a potentially suspicious transaction. If your financial services organization has yet to make the switch to the cloud, learn more about the benefits and increasing importance of doing so.
Table of Contents:
- Moving into the future
- Disaster recovery
- Transitioning financial services to the cloud
- Seize the future with cloud content management for financial services
- Learn what the cloud can do for you
Moving into the future
If a banker from the past were to suddenly wake up in the 21st century, they wouldn’t recognize the financial industry. Many of the same services exist today that existed 100 years ago, but the methods of delivering them have changed dramatically. For example, people can now transfer money directly from one bank account to another or cash a check through a bank’s app, all without having to go to a physical bank and fill out a form.
Technology in finance has also made transactions much more secure and safe for customers. When financial institutions relied on paper-based transactions, there was a high risk of fraud. A person could falsify a signature or alter the information on a deposit slip. The financial services cloud makes it increasingly difficult for a bad actor to tamper with documentation.
The cloud also removes the burden for financial institutions of maintaining on-premises servers. Traditionally, financial institutions have kept their own data centers. Those data centers could be costly, as they require physical space, either at an institution’s headquarters or nearby. Data centers are also notorious for using a lot of energy, which can hinder a financial institution’s bottom line.
So far, around 12% of financial services are cloud-based. Over the next two years, that’s expected to double to almost a quarter.
Financial institutions that have made the switch to cloud financial services have already noted numerous benefits, among them a reduction in costs. In some cases, making the switch to the cloud has resulted in billions of dollars in savings.
While the future of the financial services cloud looks bright, some financial institutions still have concerns, notably around protecting the information that’s stored in the cloud. Fortunately, those in the financial cloud services industry have developed protocols and regulations that aim to keep data secure.
Take a look at how cloud financial services can benefit financial institutions now and in the future.
When the COVID-19 pandemic began in early 2020, much of the world had to quickly pivot to a remote way of existence. Lock-downs and stay-at-home orders kept people from going to work or from conducting everyday activities, such as going to the bank, in person.
People needed a way to access their financial information and continue to pay bills, send money to family, and use their credit or debit cards which wouldn’t require an in-person visit. They also needed to be able to easily contact their financial institutions when there was an issue.
While the pandemic didn’t create the need for self-service fintech, it accelerated its adoption. Even as the world began to reopen, many people realized they prefer the convenience of being able to bank or conduct other financial transactions from home.
Cloud financial services make a self-service banking and finance experience possible. With the cloud, financial data is centralized. Those who work for a financial institution can access it whether they are at the company’s headquarters or a branch or working from home. No matter their schedule, a financial institution’s customer can get access to their data and apply for loans, open new accounts, or send money, thanks to the cloud.
Enhanced security and data management
Security is a prominent concern in the financial services sector. Financial institutions and companies that handle financial information have an obligation to keep their customers’ data safe and secure. For example, companies that accept payment cards, such as debit or credit cards, need to comply with the Payment Card Industry Data Security Standard (PCI DSS). Some companies need to comply with Financial Industry Regulatory Authority (FINRA) regulations or SEC 17a-4.
Cloud service providers that work with financial institutions typically have regulatory frameworks in place that allow the companies to follow any necessary security standards and requirements. Often, cloud service providers have several features in place that aim to keep data away from prying eyes and out of the hands of unauthorized individuals.
One common security measure is encryption. Encrypting data scrambles it so it can’t be understood should someone seize it. If a bad actor breaks into a cloud server and downloads customer financial information, they’ll end up with a string of random numbers and letters that won’t make much sense.
To crack the code, the bad actor would have to get their hands on a key. Today’s encryption keys are 256-bit and algorithm-based. To break a 256-bit encryption without a key, a third party would need to try 2256 different combinations. This 256-bit encryption is so secure that even the fastest computers would struggle to break it.
2. Zero-trust model
Another security measure frequently used by cloud services providers in the financial industry is zero-trust. True to its name, zero-trust trusts nothing and no one.
The zero-trust model recognizes that data needs to be protected from outside parties, such as malicious attacks and hackers, and from inside parties, such as users who might not have the appropriate permission level. Using the model, a cloud services provider also verifies a user’s identity before allowing them access to content.
With a zero-trust model, a user can’t stay logged into a system indefinitely. They’ll need to put in their login credentials each time they want to access the information, even if they’re using the same device they regularly use.
3. User training
User education and training are key components of cloud security. Along with verifying the identities of users each time they try to access your institution’s content, it’s important for a cloud services provider to have password policies that aim to keep data safe.
Users should be taught how to create a strong password and should also be required to change their password frequently. They should be given guidance on best practices to use when creating passwords to minimize the chance of a third party guessing them.
4. Multi-factor authentication
Multi-factor authentication is another security measure that protects content. When a user tries to log in, they must provide their credentials. To prove they are who they claim to be, they also need to demonstrate that they have access to a device or account the legitimate user owns, such as a mobile device or email address.
5. Efficient management
Along with better security, cloud content management systems allow financial institutions to more efficiently manage their data. A financial services company can determine how accessible its data is and how long it will be stored. The company can establish user permissions that determine who can access what and when, without having to depend on the IT department for access.
It’s not a scenario anyone wants to consider, but it’s a scenario every financial institution needs to prepare for: data loss. Financial institutions that rely on physical means of storing data, whether those are paper files or on-premises servers, need to have a secondary method of backing up their data in case of loss.
Traditional backups can be time-consuming and must be scheduled regularly to prevent any loss. They also often require physical space, whether it’s another set of paper files or additional servers.
The cloud makes it easier for financial service companies to bounce back from data loss and disaster. When data is stored in the cloud, it’s stored on multiple servers, across multiple data centers. If the power at one data center goes down or a server fails, the others remain operational.
In an emergency, such as a fire or storm, you can rest assured that your data won’t be affected. As soon as you can connect to the internet again, you’ll be able to access the information. Your customers will also be able to regain access to their financial and account information quickly and easily when your company switches to a cloud content management system.
Improved capacity for growth
The expectation for digital experiences is speeding up the growth process for financial service companies. Today, it’s not enough to simply be a savings and checking bank. Your financial institution also needs to offer loans, credit cards, and peer-to-peer payment services. Customers are looking for increased convenience and more affordable banking options.
The cloud can grow and scale as your institution grows. It’s much more affordable to increase your cloud storage requirements than it is to build a new data center or to install more on-premises servers.
Thanks to the cloud, your company can quickly add new features and services without having to take your other offerings online. Customers won’t lose access to their accounts while you upgrade servers or add new features. The cloud lets you improve your service offerings while keeping your customers happy and well-served.
Using the cloud also allows you to increase the size of your customer base without the fear of crashing your system. You can even merge with another financial institution, absorbing data about its customers into your own content management system. When everything’s in the cloud, the transition is seamless.
Potential for innovation
Digital engagements are opening a lot of doors for financial service companies. Technology allows your company to offer more services to customers and get creative in the way it offers those services.
The cloud is agile, which can make your company agile. When you use a cloud content management system, you can more easily share the necessary information to develop new products and services with your team members. A remote team can collaborate on the development of a new peer-to-peer payment system or a new rewards-based payment card, thanks to the cloud.
A cloud-based system also helps your organization pivot quickly. Financial service companies that use the cloud had a heightened ability to switch to a remote-based work system during the pandemic, for example. Similarly, a company that stores its data in the cloud can bounce back more quickly after a power outage, storm, or other type of disaster.
Lower operational costs
Generally speaking, switching to the cloud saves financial institutions money. If a company wants to use physical servers and on-premises data centers to store and manage its content, it needs to pay for those servers upfront. It also needs to pay for the physical space used to store the servers, whether it’s in a room in the company’s headquarters or in a data center located off-site. Those costs add up over time.
Since cloud-based storage is scattered across servers, a company doesn’t need to purchase the servers or pay to store them. The cloud services provider is responsible for maintaining the servers, so a financial institution also doesn’t have to worry about making sure the servers are in good working order or paying for repairs.
Pricing for cloud services providers can vary from company to company but is usually based on the amount of storage your institution needs, the size of the files it uploads, and the number of users it has. The price can increase or decrease as your financial institution’s needs change, making it a much more flexible option.
Better customer relationships
The cloud lets your financial institution improve the relationship that matters the most — the one with your customers. Customers typically want and expect a few things from the financial service companies they work with:
- They want easy access to their money. That means if they want to send cash to a friend, they expect to be able to do so without having to visit a bank or wait for hours or days for the transaction to clear.
- They want a positive experience. If a customer has a problem, such as forgetting their password or losing their payment card, they want to fix it quickly.
- They want a more personalized experience. They want recommendations that are relevant to their needs and financial advice that suits their lifestyles.
The cloud lets your financial institution provide all those things to a customer. Thanks to the cloud, customers can easily reset their passwords at home, without having to make a phone call or spend hours on hold.
If they lose their payment card, a customer can log into the cloud-based service portal to quickly cancel it and request a new one. They can also send money to friends or pay their bills without a check or a visit to the bank or ATM.
The cloud also increases a financial institution’s capacity to provide top-notch service to customers. For example, a credit card company can more quickly detect unusual account activity and can temporarily freeze a customer’s account while it investigates. Using the cloud can give a credit card company the bandwidth needed to use AI and machine learning to instantly recognize activity that’s out of the norm.
The result is less frustration for customers down the line and the ability to quickly resolve any issue, whether it turns out to be fraud or not.
Similarly, using the cloud lets a financial institution scale as customer demand increases. During busy shopping seasons, a payment card company can increase its upload size so more transactions can be processed at the same time. Customers won’t have to wait by the register or in front of their computers for the transaction to finalize.
Transitioning financial services to the cloud
The cloud is the future of the financial services industry, and many major banks and financial institutions have already started to make the transition. In the coming years, the number of financial institutions that rely on cloud technology will only increase.
The transition isn’t without its challenges. The financial services industry is heavily regulated. From PCI DSS to FINRA, there are many necessary regulations for cloud providers and financial institutions to follow. A knowledgeable and trustworthy cloud provider will ensure its services are compliant.
The Federal Financial Institutions Examination Council (FFIEC) issued a statement on behalf of its members that addressed the use of cloud services and risk management principles for the financial services sector. In the statement, the FFIEC strongly recommended that institutions that use the cloud have a backup system in place to keep data secure. Backing up your data can help minimize the potential losses that could result from an outage.
Even with the potential challenges, financial service companies that have partially or fully transitioned to the cloud report that they aren’t looking back. The benefits for companies, their employees, and their customers make any potential bumps in the road worth it.
To make the transition to the cloud as smooth as possible, keep an eye out for the following when assessing a cloud platform:
- Access control, such as a zero-trust model
- Disaster plan
- Data segregation
- Data management
Seize the future with cloud content management for financial services
Moving to the cloud brings your institution one step into the future. A powerful platform for financial services allows you to provide a seamless omnichannel experience to your customers. With cloud content management services, you can perform daily tasks such as loan processing, customer onboarding, merger and acquisition activity, and updating financial information efficiently and easily.
Choose a financial services cloud provider that also offers full compliance and security according to the following regulations:
- SEC 17a-4
- MiFID II
Look for a robust retention management capability that ensures your organization retains and disposes of content as appropriate.
Whether you’re in banking, insurance, or investment services, cloud technology can help bring your company into the 21st century, all while allowing you to improve customer relations and maintain compliance. Get ready for the future of the financial services industry with highly compliant cloud software.
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**While we maintain our steadfast commitment to offering products and services with best-in-class privacy, security, and compliance, the information provided in this blogpost is not intended to constitute legal advice. We strongly encourage prospective and current customers to perform their own due diligence when assessing compliance with applicable laws.