Scopes and Impact of Cloud Computing on Banking & FinTech

The rise of cloud-based software has offered companies from all sectors a number of benefits. Even for personal use, platforms like Google Drive or Dropbox have become highly popular. Using software from any device, either via a native app or a browser from any location is a seamless act now. Among all the major sectors, the banking industry has been one of the most beneficial ones due to cloud technology. In this article, we will understand what is cloud computing and the scope & impact of cloud technology on Banking & FinTech domains.

What is Cloud Computing?

Cloud computing, in short, “Cloud storage”, is a new technology for storing data over the internet. It’s a hybrid technology of computing various services like servers, software, networking, storage, databases, analytics, and many more over the internet.

Simply put, cloud computing is the delivery of computing services—servers, storage, databases, networking, software, analytics, and moreover the Internet (“the cloud”). Companies offering these computing services are called cloud providers and typically charge for cloud computing services based on usage, similar to how you are billed for water or electricity at home. Cloud services are delivered on-demand via the internet with pay-as-you-go pricing.

Impact of Cloud Computing on Banking & FinTech
Source: CloudOYE

Cloud computing has become a one-stop solution for all problems related to any kind of information. In the case of banking and Finance, sector cloud computing made many things easier like interoperability, secure storage, 24×7 uptime, etc. This advancement in IT sector led to many drastic changes in a way of treating information. Instead of using a traditional way of storing the info many new techniques like big data, machine learning & AI, IoT came into the picture to store and operate the information directly through the internet.

The global market size of the fintech sector is expected to reach $124.3 Bn by the end of 2025, with a compound annual growth rate of 23.84%.

Impact of Cloud Computing on Banking & FinTech

Types of Cloud Computing

Cloud computing has three main types that are commonly referred to as Infrastructure as a Service (IaaS), Platform as a Service (PaaS), and Software as a Service (SaaS). These are sometimes called the cloud computing stack because they build on top of one another.

Impact of Cloud Computing on Banking & FinTech

Software as a Service (SaaS)

Software-as-a-service (SaaS) is a method for delivering software applications over the Internet, on demand and typically on a subscription basis. SaaS provides you with a completed product that is run and managed by the service provider. In most cases, people referring to Software as a Service are referring to end-user applications. SaaS licenses are typically provided through a pay-as-you-go model or on-demand.

A common example of a SaaS application is a web-based email where you can send and receive email without having to manage feature additions to the email product or maintain the servers and operating systems that the email program is running on.

Accounting, enterprise resource planning (ERP), customer relationship management (CRM), human resource management, invoicing, service desk management, and content management software can be delivered using this model.

Infrastructure as a Service (IaaS)

IaaS is the basic building block for cloud IT and typically provides access to networking features, computers (virtual or on dedicated hardware), and data storage space. With IaaS, you rent IT infrastructure—servers and virtual machines (VMs), storage, networks, and operating systems through IP-based connectivity as part of an on-demand service.

Platform as a Service (PaaS)

PaaS is the cloud computing service that supply an on-demand environment for developing, testing, delivering and managing software applications. PaaS removes the need for organizations to manage the underlying infrastructure (usually hardware and operating systems) and allow you to focus on the deployment and management of your applications.

Among the three layers of cloud-based computing, PaaS is considered the most complex. PaaS shares some similarities with SaaS. The major difference being that instead of delivering software online, it is actually a platform for creating software that is delivered via the internet.

Impact of Cloud Computing on Banking & FinTech
Source: Edureka

Scope of Cloud Computing on Banking & FinTech

Cloud computing creates an opportunity for bankers to connect with their users directly. Digital services maintain customer relations anywhere and anytime through cloud computing. With the help of the internet, many services like storing, managing, and accessing information have become easier for both bankers and consumers. Cloud computing is an easy technique to deploy and integrate with all the services of the bank system which decreases the time and effort of the user.

The evolution of cloud computing enabled the banks to focus more on the customer-centric model and digitalizing trading & wealth. Cloud computing creates a multi-channel relationship with the customers in every aspect of the service. It helps in storing, backup and recovering huge data of the company.

Not only the storing of the data, but various other services like delivering the software, transferring the data, and updating and recovering data are also very easy through cloud computing technology. Cloud computing also increases the turnover of banks by integrating cost-effective cloud solutions.

Why do the Banking and FinTech Sectors Need Cloud Computing?

The banking industry needs to address the ever-growing data input demands. There is a need to explore the systems that do not rely on like-system migration so that infrastructure can be modified without any disruption. Banks have been slow in adopting cloud computing as there are apprehensions regarding reliability, regulatory and security risks. But slowly, cloud computing is changing the way consumers interact with banks.

FinTech maintains substantial growth and sustains the growth constantly, courtesy of cloud technology. FinTech reduces the CAPEX and OPEX budgets and increases the service portfolio and the user experience. The most important aspect of cloud computing is reducing the risk factors related to the data center and its infrastructure. The confidential data will be completely secured. It also helps in risk analysis of the business so that the main focus will be on business rather than securing crucial information.

How Cloud Computing is Impacting the Banking and FinTech?

Geo-redundant Cloud Data Centers

Events like storms, power outages, or hardware failure may disrupt regular business operations, resulting in downtime and data loss. Geographic redundancy will help businesses maintain operational continuity in the event of calamity by allowing them to easily migrate vital applications and data to one of the geographically distributed secondary locations.

Regulatory Compliance

Regulations pertaining to the banking sector, such as PCI DSS and PCI 3DS, are in effect for all cloud service providers. Following the minimal security requirements set out by PCI DSS enables financial institutions and consumers to guarantee that the risk of loss from fraud and cyberattacks is kept within acceptable bounds.

Self-Service Applications

Given the exponential growth of financial data, managing it without cloud services could have been difficult. Cloud technologies have enabled fintech companies to securely and reliably store and manage data.

It also enables businesses to use clever loan, payment, and fraud prevention techniques. It provides businesses with a highly secure platform, advanced engineering, and configurable services that enable them to provide excellent customer service.

Ease of Deploying Managed Machine Learning

The use of machine learning algorithms in businesses is an important component of predicting financial trends. The use of ML algorithms by fintech companies can help them forecast market risk, identify potential business opportunities, reduce fraud, and so on.

Businesses may use large amounts of data to train their machine learning models, such as financial transactions, loan repayments, company shares, customer interactions, and so on.

Cloud Native

Instead of creating entirely new environments for application development, cloud-native allows businesses to create microservices, which reduces vendor lock-in and increases portability.

Due to the flexibility of cloud-native applications, fintech organizations are able to innovate, quickly launch new services, and consistently deliver positive user experiences regardless of the volume of traffic hitting their systems.

Quantum Computing

Quantum computing in the fintech sector is increasingly being acknowledged for solving critical problems like cybersecurity, where it plays an important role in safeguarding customers’ financial data using next-gen cryptography; financial data encoded with quantum cryptography is highly secure than the present levels of digital security.

Data Security

A major concern for the Fintech sector is identity theft and data breaches. To protect the payment system, fintech businesses utilize one-time passwords and other authentication techniques. Hackers still succeed in breaking into these systems and stealing financial and personal data.

Since cyberattacks are becoming more sophisticated every day and it is difficult to provide total security in the digital world, financial institutions have always run the danger of data leaks.

Some of the big names in the FinTech cloud computing sector are:

  1. Amazon Web Services
  2. Google Virtual Cloud
  3. Microsoft Azure
  4. Aliyun
  5. IBM Bluemix

Impact of Cloud Computing on Banking & FinTech

Applications of Cloud Technology in Banking & FinTech

  • Cloud computing increases efficiency in the industry. The usage of cloud technology is an added advantage in the banking and finance sector. Digitalizing the services will allow banks and financial institutions to build up an infrastructure to provide the best and most appropriate service to the customers.
  • Data centers generally go through many attacks from hackers which corrupt and led to the loss of very crucial information in the bank. Such attacks can be eliminated by authenticating the data centers which is very easy through cloud computing. Every data stored is safe with hybrid cloud computing technology.
  • Amazon web services and Microsoft’s Azure are cloud providers that provide hybrid cloud computing servers to companies. Getting the hybrid cloud computing servers provides end-end protection to the information stored in the cloud. Cloud computing ensures Confidentiality, Integrity, and Availability of information over the internet.
  • Cloud computing ensures secure transactions and a smooth customer experience in banks. Hosting over the internet with the help of web apps ensures better speed and service to the users.
  • Payment Gateways, digital wallets, online fund transfers, and secure online payments are among the best examples of cloud computing services. Cloud ensures a secure and unified customer experience. Updating the payments is quite very easy through cloud computing.
  • Enterprise Resource Planning (ERP) and Customer Relationship (CRM) software are the most popular software of cloud computing. This software allows banks and financial institutions to secure the data and also provide better support to the customers. This software also enables remote access to the information by the users.

Other cloud computing services in the financial sectors are:

  • Insurance Data Exchange Cloud Service
  • Financial Services Revenue Management and Billing Cloud Service
  • Insurance Revenue Management and Billing Cloud Service
  • Financial Services Lending and Leasing Cloud Service
  • Banking Cloud Service
  • Health Insurance Value-Based Payment Cloud Service

Benefits of Cloud Computing in Banking & FinTech

  1. Cost-effective

Cloud computing reduces all the capital expenses of buying and setting up hardware and software at data centers. This makes the banks to focus more on banking functions.

  1. Feasibility

Cloud computing services enable easy use of the data. A large amount of data in banks is feasible to use. Cloud computing helps banking and financial services to manage the different demands in the banking world.

  1. Reliability

Cloud infrastructure is highly reliable. Cloud computing gives a complete data backup to information. Data can also be accessed at multiple redundant sites with utmost ease. Hybrid cloud models give the utmost security to the data. The data saved in the cloud is encrypted well to eliminate all kinds of security threats in banks.

  1. Productivity

Cloud computing eliminates all the unnecessary time of racking and stacking data in the banks, hence increasing productivity. Every task in the bank related to the information will be taken care of by the software through cloud computing.

Impact of Cloud Computing on Banking & FinTech


Every technology has its own pros and cons, while in the case of the cloud, computing limitations can be considered as precautions. These precautions need to be taken care of by the bankers who enable high ended and secure service to the users.

Security in the cloud servers is considered to be the main issue. Maintaining the confidentiality and security of the financial information of customers and internal company data is very important in banking and finance institutions. If proper precautions are not taken by the vendors then entire confidential data will get corrupted. This could be avoided by encrypting the cloud service and storage of confidential information in private storage can help in managing the risk.

Read Careers in Cloud Computing and DevOps.

Acknowledgment: This article has been co-authored by Parinita Gupta, a banking professional & digital marketing expert.

Sources: 1, 2, 3, 4, 5, 6, 7, 8.

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