Why the banking sector can’t do without Cloud Computing?

After the advent of digital, Cloud Computing is probably the technology that has revolutionized business structures, production processes, and entire industries more than any other. In this post, we will focus on a very important sector that impacts us all: the banking sector.

Let’s start from a very simple question: how important is cloud technology for the banking sector? And, above all, how important will it be in the future?

A survey from “The Economist” found that as many as 74% of experts say that the cloud will be one of the central points of focus for business over the next 5 years. Only 15% consider it moderately important. According to a study by IDC, banking as a whole is among the top three sectors planning to invest more financial resources in cloud services, as much as $20 billion for the next year alone. 

We will also focus on the positive impacts that cloud technology has on the various sector areas and processes, specifically around cost reduction, flexibility, customer relations, and security.

 

The starting point: cost reduction

First of all, Cloud Computing translates into targeted and intelligent savings, and overall cost reduction. Why?

The answer is simple: Relying on cloud service providers means, first of all, not having to buy expensive hardware and software, which take up space, and cost time and money (also for specialized personnel) for both management and maintenance. Next, it’s about on-demand and pay-per-use optics. Translated: enormous (and previously unthinkable) computing power and storage capacity, available immediately and at a low cost, according to demand and without the responsibility for managing or maintaining it. Instead, this aspect is entrusted to the external cloud provider who offers a level of specialized expertise that is impossible to achieve with internal staff.

It is no coincidence that, in the study by The Economist already cited above, about 60% of those surveyed cited cost reduction as one of the most decisive aspects of the transition to the cloud.   

 

The importance of flexibility

As we mentioned above, the cloud, thanks to the on-demand approach, allows companies to significantly reduce costs, while increasing performance.

But that’s not all. Thanks to this “on-demand” approach, flexibility and scalability also increase exponentially.

In an ecosystem that is changing rapidly due to continuous tech innovation, this is more important than ever before. Such innovations in fact, are spurring important changes in both the market and in customer expectations. For banking organizations, it’s an absolute necessity to be able to quickly adapt to these changes; this can be difficult if you are linked to “physical” and local infrastructures. This applies to all types of industries, but it is even more decisive for the banking sector.

Think of the speed required to put new products and services on the market: with the cloud, the necessary IT resources are activated on-demand, without excessive investment in IT resources.

Then there are some exceptional cases, related to complex banking operations that occur once in a while, or rarely. Often, these are very delicate situations where you cannot risk errors or malfunction: such situations may require a very high computational power, concentrated in a short period of time, to handle abnormal peaks of operations. 

With the cloud, these extraordinary and “emergency” scenarios can be managed with ease, without overallocating IT resources. Once the peak period has passed, the cloud makes it easy to quickly return to normal management. You can understand how fundamental this is.

 

Improve the relationship with customers with personalization 

How important is your relationship with customers? Most companies see the value in improving several customer-focused activities: communication, Customer Experience, and CRM (Customer Relationship Management). We’ll look at industry data to answer these questions.

First, according to a 2017 Gartner survey, as many as 81% of organizations from all sectors expect Customer Experience to be the area where companies will be competing.

Now let’s move on to banking, specifically: according to McKinsey, improving the Customer Experience increases the likelihood of customers renewing their purchases (or buying more) by 30 to 50%.

So, how do you improve your relationship with customers?

The answers could be many, complex, and multifaceted. But they all revolve around a key concept: that the most effective way to improve the relationship with customers is to know them more deeply, to be able to anticipate their desires and needs, and to talk to them in a personalized way. To be in the right place, at the right time, with the right proposal.

Until recently, it was impossible to apply this to the huge audiences of sectors such as banking. However, this is now possible thanks to digital transformation and analysis of Big Data. All of us, online and through all the different devices we use every day, leave digital traces that help companies to understand who we are, our characteristics, how we behave and how – tendentially – we will behave in the future. By analyzing these tracks in depth, companies can divide their audience into increasingly specific targets, to be hit with tailored actions.

Of course, all this requires a very high capacity for data processing, storage, and interpretation, capacity that only Cloud Computing systems can guarantee.

You can go even further, to the point of personalization: addressing each person in a different and interactive way, with a one-to-one dialog. That’s what a company specializing in marketing services and personalized customer service like Doxee does. To give a concrete example: Doxee has created a campaign based on personalized videos for Poste Italiane (focused on its new “Smart Booklet” tool), which allows them to communicate with customers effectively and in omnichannel mode. The video narration is built step by step, according to the choices of the user who, instead of being a passive user, becomes an active agent (for further information see this article).

 

The basis of everything: safety

If the issue of security, after digital transformation, has become of primary importance in all sectors, it is even more so in the banking sector. The reasons are clear: we are dealing with large sums of money, with customers’ life savings, and with very sensitive, personal data. Let’s make one thing clear right away: Cloud Computing systems guarantee the highest level of security; the necessary condition is to rely on solid and reliable providers.

But why is a system in the cloud more secure than one in-house?

First of all, it’s a matter of budget: cloud system providers invest an enormous amount of time and money to constantly update and maximize their security systems. This level can hardly be reached by individual banks; and, in any case, the expense would be enormous.

Then there is another fundamental aspect: the banking sector, for several years now, has been abandoning the rigid and closed structure of years past. This is mainly due to digital transformation: web and mobile apps, often tailored to the user, the need to be always-on, and in omnichannel mode. All of this makes the system much more vulnerable to cyber threats, which are constantly evolving and increasingly refined.

Also for this reason, it is very difficult for a local security system to compete with the systems put on the track by cloud service providers, which are constantly updated.