“The advance of technology is based on making it fit in so that you don’t really even notice it, so it’s part of everyday life.”
—Bill Gates, co-founder of Microsoft
Initially, banks were considered the economic tools to lend money and accept deposits from the public. The banking sector has been critically acclaimed for achieving economic stability. The need to strengthen the banking system was more realised only after India introduced the LPG policy in 1991. The then Finance Minister, Dr Manmohan Singh, opened the floodgates of trade opportunities by introducing liberalisation, privatisation, and globalisation policy in India. Hence, as a result, for better public service experience, private banking was introduced in India vide establishing Axis Bank, ICICI Bank, and HDFC Bank from 1993 to 1994.
This was one of the major developments in the banking sector post-Independence era and the banking sector has kept developing since then. The invincible development came in terms of the adoption of new-age technologies incessantly over time. Due to this, traditional banking processes have given place to the most cutting-edge technological advancements. Among these, the implementation of CORE (Computerised Online Real-time Exchange) Banking in India was a watershed moment. Nowadays, the common public doesn’t need to visit the banks physically due to the advent of net banking, digital payments, smart cards, mobile banking, kiosk banking, etc. Banking processes are now considerably faster and more trustworthy, resulting in improved consumer relationships with banks. The next phase of banking sector development is the introduction of AI and Machine Learning. This is crucial, as the technology advances, fraudsters find it more opportune to commit forensic fraud. Machine Learning has already proved to be a very efficient tool in credit card management by banks. With the deployment of modern technologies, India’s banking industry is poised for a revolutionary space.
Due to the sensitivity of the banking operations and dealing with public funds, banks are subject to strict regulation and governance. Despite their cautious approach, the market volatility forces banks to look for ways to cut operating costs and introduce innovative products that would give better market coverage and a faster return on investment. In terms of product and service offerings, India’s corporate banking sector is still in its infancy as compared to developed economies. So, to have efficient and cost-effective operations, banks should consider cloud banking. Cloud computing is a technical innovation that is transforming the banking business. According to a recent IDC report, nearly 80% of corporate banks in India are expected to operate their trade finance and treasury workloads on Cloud technology by 2024.
When cloud computing was first introduced, cloud maturity levels were low and banks were hesitant to implement it since they are bound by standards, data protection, and regulations. The cloud environment has matured significantly, and most banking rules and regulations have been changed to support cloud computing. The cloud is a crucial part of the service delivery architecture as it allows banks to tap into new delivery channels and business opportunities. Banks can reduce data storage costs by saving on capital and operating expenses while assuring client data security by utilising cloud-based services. Cloud computing also encourages secure online payments, digital money transfers, wallet transactions and more.
While few Urban Co-operative Banks and Regional Rural Banks were early adopters of cloud technology, we should expect larger institutions to gravitate toward cloud services now. As a start, YES Bank has implemented cloud computing and has been an early adopter of cloud-based banking services. But using more technology means dealing with more big data. Millions and trillions of transactions occur every passing minute and it is becoming difficult for banks to manage the data efficiently. Banks need to spend more on IT solutions, networking, hardware, and software to meet various stakeholder’s demands. Due to increased capital expenditures, banks find it difficult to attain the desired level of IT implementation. Cloud computing offers to assist the banks in reducing capital IT infrastructure expenses. Hence, banks are rapidly trying to adopt cloud-based IT solutions.
Cloud technology enables banks to adopt a new paradigm for delivering creative channels, reducing time to market new offerings, satisfying customer expectations, and complying with regulatory rules at a cheaper cost. System administrators can remotely build, install, configure, and deploy virtual resources to run a business solution using cloud computing. Furthermore, cloud IT infrastructure can be scaled up or down at any time based on predicted usage and requirements. Banks are quickly realising that with cloud banking, they can store data and quickly access it. The cloud has appeared to be a superior data management tool providing banks with agility, scalability, and security. Faster deployment of financial services, lower costs of new applications, and greater flexibility are just a few of the reasons why banks are choosing cloud over traditional IT infrastructure.
Key benefits in switching to Cloud Banking:
1) Banks don’t need to invest heftily in infrastructure costs. The saved money can be invested in running the operations smoothly.
2) Gone are those days when people feared the breach of security while using Internet-based solutions. Some of the world’s most well-known brands own public cloud servers as it is more secure.
3) Banks can reach out to a large customer base through various mobile and app-based features. Many banks have started AI-based WhatsApp banking.
4) Cloud technology can make the banks swifter in operations by enabling banks to deploy newer services to customers.
What has refrained banks from switching to cloud technology so far? Here are some of the reasons. The systems with older programming languages or connectivity constraints may find it difficult to move to cloud technology. Furthermore, many financial institutions struggle to establish which systems can be moved to the cloud and which must remain on-premise. Leaders may be confused about whether or not shifting a system to the cloud will expose them to regulatory risk. Banks should compare the expenses of hosting data on-premises and maintaining their own servers against the price of moving to the cloud. Migrating can be costly if banks don’t have proper resources and technological know-how. Networking is also a mini barrier when using a cloud-based approach. As per RBI regulations, banks must operate in rural and semi-urban areas in India wherein network latency can be a barrier. If fraud occurs, investigators will have to rely on a large amount of data scattered across various locations, making their task difficult.
Banks require technology that makes migration smooth and rapid. The actual transition period does not have to be onerous, provided IT teams have the appropriate technology in place and a risk team on hand to review security measures. Modern technology solutions are available in the market that allows banks to deploy cloud applications in two to three months rather than years.
Banks should invest in cloud migration. Financial institutions will gain increased agility to rapidly and effectively respond to changing customer needs. Banks need to confront the issues and invest in apt solutions to reap the benefits of migrating to the cloud.
The author is a Finance & Forensic Accounting Professional and is currently associated with the education industry in the capacity of Finance Officer. The views expressed are personal.