Cloud as opportunity: transforming traditional banking

How cloud technology is future-proofing banks

Banks are adopting cloud technologies to make their IT infrastructures more flexible and powerful. The sheer strength of the cloud’s performance particularly shines through in risk management, compliance and process optimization activities, where it demonstrates its unique ability to process and scale huge volumes of data effectively and efficiently while responding dynamically to changes. The cloud also provides banks with the support they need to implement artificial intelligence (AI) and machine learning (ML) tools and technologies. We’re going to be seeing a lot more AI and ML models being used in the future in fraud prevention, risk modeling and other data-driven processes, including bank-customer interactions. But banks aren’t only turning to the cloud to safeguard their future: hybrid cloud models that combine private and public cloud infrastructures are now the norm, and provide a robust platform for running both data-intensive and business-critical applications securely and flexibly. These models enable banks to manage sensitive data in secure environments (i.e. to enhance their data sovereignty) and to leverage the scalability of this data for innovative business processes. Banks that are committed to continuously optimizing their cloud strategy are putting themselves in a strong position in the market and future-proofing their IT.

The rocky road to the cloud

However, cloud migration also brings significant challenges. In addition to the need to adhere to the highest security standards and strict compliance requirements, banks will also find that some of their applications are simply not cloud-compatible. These “legacy applications” are often deeply integrated into the bank’s existing core applications, with technical dependencies or special hardware requirements that make them difficult to migrate. The options here are therefore to redevelop (rearchitecture/refactor) these applications or to continue to run them in the existing on-premises infrastructure, or to host them with a colocation provider while other cloud-ready workloads are migrated step by step.

Factors for successful continuous cloud optimization

To fully exploit the potential of hybrid models, it is imperative that banks ensure their strategies are flexible and future-proof. This entails a seamless combination of factors: protecting sensitive data, using AI and managing applications that are not yet cloud-ready. Continuously optimizing their strategies will not only yield efficiency gains for banks, but will also ensure they are well-placed to meet ever more stringent security and compliance requirements and consistently integrate new customer needs into their long-term planning. The focus should always be on developing a clear, future-oriented IT strategy capable of meeting current needs and requirements and integrating future innovations and technological developments. This is the only way for banks to ensure their long-term competitiveness in a highly dynamic market.

Hybrid and multi-cloud models to remain the norm in the future? 

For a long time, banks were hesitant to adopt cloud solutions, not least because of the strict compliance requirements connected with the cloud. Since the major cloud providers opened Swiss data center regions in 2019, tackling data sovereignty and data protection concerns more intensively and effectively, cloud use has become standard practice even for heavily regulated financial institutions. 

Although the proliferation of AI and ML is set to increase the proportion of cloud-based workloads, data sovereignty, compliance, and legacy application processes and requirements mean the hybrid cloud model will remain an indispensable solution. This model enables banks to manage sensitive data securely in their own environments while simultaneously quickly implementing innovations.

Security a top priority for banks

Automated compliance checks, real-time monitoring and state-of-the-art encryption technologies ensure data is protected even in the cloud. Zero-trust architectures minimize potential risks and ensure sensitive financial data is optimally protected. These measures enable banks to retain full control over their data while meeting strict regulatory requirements.

Outsourcing data centers economically advantageous

Although many banks still manage and operate their own data centers, there is a marked trend toward outsourcing data centers. Opting to switch to an external provider is increasingly being seen as a strategic decision – not just for economic and regulatory reasons (sell and lease back/CapEx and OpEx), but also to enable flexible reactions to technological developments. Modern data centers such as Green’s offer access to the latest innovations, guarantee the highest security standards and meet strict compliance requirements. 

Sustainability and environmental responsibility are also playing an increasingly important role in this decision. By outsourcing to energy-efficient data center providers, banks can significantly reduce their ecological footprint and more easily meet increasingly important sustainability targets.

There are a number of advantages to outsourcing-based optimization: banks not only reduce their internal resource requirements, but also benefit from a data center with highly qualified specialists and the latest technology. Another advantage is that it eliminates the need for banks to maintain and constantly upgrade their own data center infrastructures, or indeed entire platforms. Furthermore, it significantly reduces the outlay required to meet security and compliance requirements, since these are fully covered by external partners.  

Outsourcing their data centers frees banks up to focus more resources on innovations and strategic initiatives to boost business and bolster their core competencies for the future.  

Today, it’s not a question of if banks will outsource their data centers and use the cloud, but rather when – because regulatory requirements, the pace of technological progress and the current shortage of skilled workers leave them with no other choice. After all, doing everything yourself is more of a hindrance than an advantage. 

The future is cloud, outsourcing and AI

The cloud has firmly established itself as a tool for testing trends and accessing new technologies quickly. It also offers a high level of security and resilience. As AI solutions become more prevalent, it’s clear that the pertinent data requirements and the provisioning and learning processes associated with high-performance platforms necessitate cloud or cloud-like infrastructures. 

Deciding on the right infrastructure is a complex task, and partly down to individual preference, and will remain so in the future. It’s therefore a good idea to choose a location that offers as many options as possible. 

Banks need to determine when it’s best to use their own IT systems, outsource data centers or source cloud and AI-based technologies. Finding the right balance here is increasingly important for remaining competitive. Flexibility, security, scalability and the right trusted partners are all crucial factors that influence the ability to respond to changing market requirements and remain successful in the future.