To make the most of cloud operations, banks should choose the right operating, deployment, and service models. There is consensus amongst banking IT Heads that in addition to on-premises and legacy systems, they need SaaS applications and cloud to achieve their enterprise goals.

Why cloud computing for banks?

Cloud computing, as a technology, has already started to scale tremendously. Banks are expected to transition their digital banking channels like mobile banking, internet banking, agent banking, mobile wallet, merchant payment, and other priority channels from on-premises to cloud-based services gradually. It is dawning on on-premises digitalised banks that to increase security, offer diversified services and stay competitive, they must tap the cloud for solutions.

Compliance and security issues have impeded cloud adoption by digitalised banks, however, improved levels over the years have built confidence in banks about the potential and benefits of the cloud. To improve performance incrementally, cloud computing can help banks in a variety of ways.


Cost savings and usage-based billing

The biggest advantage for banks is that they can break down their large and visible capital expenditure into day-to-day smaller and continuous operating costs. This helps them to defer large investments in expensive next-generation hardware and software. Cloud computing by its very unique nature, allows banks to use services required on a pick-and-choose basis and pay for different services on a piecemeal basis as you scale up operations.


Business continuity, agility, and focus

Managing technology becomes the responsibility of the service provider in cloud computing. As a result, digital channels of banks can attain an increased level of disaster recovery, fault tolerance, and data protection. One can also ensure avoidance of repetitive tasks and backup at a minimum price. Cloud-based operating models can speed up product lifecycle thus ensuring greater responsiveness to customer needs. On-demand cloud also helps to save initial set-up time.


Security and Compliance

Banks face considerable security risks when customers undertake online banking through laptops and mobile banking apps. While financial technology evolves to meet the increased expectation of customers for banking information, security concerns remain of paramount importance. Cloud infrastructure, platforms, and applications enhance security with end-to-end encryption and authentication. Compliant cloud solutions through service level agreements and data center compliance standards can protect sensitive customer information.

Choosing the right model

The answer to the quest by banks to shift to low operating costs from a capital-intensive approach lies in the service models which the cloud offers. However, business needs must be matched to the right cloud service model:


Business Process-as-a-Service (BPaaS)

BPaaS combines other service models excluding billing, payroll, or human resources with process expertise.

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Software-as-a-Service (SaaS)

Implement a digital solution suite comprising mobile banking, internet banking, agency banking, mobile wallet, merchant payments & other digital channels on the cloud to drive banks’ digital transformation programs. Software and data like accounting, CRM, ERP, invoicing, HR, content management, and service desk management in the cloud are accessed by users via their web browser.

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Platform-as-a-Service (PaaS)

By providing an all-inclusive platform for testing, storage, database development, interface, and application, a cloud service provider enables banks to optimize the development of customized applications thus minimizing IT costs.


Infrastructure-as-a-Service (IaaS)

This cloud model permits banks to purchase network equipment, data center space, software, and servers as a fully outsourced service.

Cloud deployment models

The three most common methods in which service providers deploy cloud for banks are:


Private clouds

Considered to be the most secure, here the cloud infrastructure is geared for a particular bank where it is managed by the bank or a third party and may be present on or off the premises.


Public clouds

In this, the cloud infrastructure is owned by the cloud service provider and is accessible to a large banking consortium or the general public.


Hybrid clouds

Here, two or more private or public clouds comprise the cloud infrastructure that maintains their unique identities but are linked to provide services to banks.

Cloud operating models

The three most common methods in which service providers deploy cloud for banks are:


Staff augmentation

To achieve cloud expertise, banks can hire skilled people from service vendors and place them in the bank’s offshore captive centre thus allowing for flexibility and optimum talent utilization.


Virtual captives

If banks wish to avoid a complete outsourcing approach, then they can meet their needs through virtual captives that have a committed pool of resources or centers.


Outsourcing vendors

This model allows a third-party vendor to provide people, facilities, and offshore centres when multiple banks want cloud services by combining resources or investments.

Moving to the cloud: the challenges

When moving to cloud computing, a bank faces two challenges. The first is protecting financial, personal data, and mission-critical applications and averting a security breach. The second challenge is regulatory compliance since many countries require that residents’ data be stored in that country and the data should not be intermixed with shared servers or databases.

To make the most of cloud operations, banks should choose the right operating, deployment, and service models. In the initial stages, banks would own most of the cloud infrastructure but as cloud computing technology progresses over time, service providers would take ownership of most of this responsibility to ensure compliance and security concerns. Banks can test their new applications on the cloud and thus save on capital expenditures in the form of new technologies or infrastructure.

Overcoming cloud vs in-house risks

Cloud computing offers banks flexibility and scalability and saves them on time and costs overruns. On the other hand, on-premises software and applications offer banks reliability, security, and control that the cloud often does not. However, there is a consensus amongst banking IT heads that in addition to on-premises and legacy systems, they need SaaS applications and cloud to achieve their enterprise goals.

In cloud computing where data and applications are hosted by a third-party provider, it allows the banks to pay on an as-needed basis and depending on the usage, requirement, and growth of the bank to scale up or down effectively. In the cloud, the bank’s applications are hosted offsite by using virtual technology. For banks that aspire to go global, the cloud allows them to bond with their clients, partners, or other organizations with nominal effort.

Modefin’s channels for cloud migrations

From a transaction-oriented business model to a personal preference customised service, banks are now transitioning to streamline business processes, secure their data, and transform their legacy systems by moving to the cloud. Modefin has a slew of channels to address these challenges.

  • Mobile Banking: With its upgraded suite, its secure, intuitive and scalable solution enables a seamless banking experience, and its service-based architecture supports a wide range of services.
  • Internet Banking: Contactless banking is enabled by a robust internet banking service. Its cutting-edge banking solution helps customers enjoy a seamless and personalised experience.
  • Agent Banking: Its Agent Banking application empowers 100,000 agents to offer banking services through mobile or POS devices to 20 million customers.
  • Mobile Wallet: This enables its customers to experience cash, payment, top-up, and convenience on the go that make visits to the bank branch or the ATM redundant.
  • Micro Savings & Lending: This is a digital solution designed for account holders with a lower float, lesser income, and greater propensity to save or borrow smaller amounts.
  • Group Savings & Lending: It is a forward-looking solution that helps onboard customers in the lower-income segment, and enables Group members to borrow for expenses, make miscellaneous payments, or avail funds for a contingency arising from adverse circumstances.

Products regarding core banking integration

New core banking solutions create the stepping stones to increase a bank’s efficiency and foster its growth. There has never been a better time for banks to consider replacing old legacy banking systems with more flexible, agile, and efficient packaged solutions. An array of products Modefin rolls out enables this integration.

  • Keyboard/Social Banking: In this Modefin product, MFSKey technology enables banking through the Keyboard Banking app. Banking services can be initiated from any social media application such as WhatApp or WeChat.
  • Digital Onboarding: Modefin’s Digital Onboarding solution has AI@core and helps to eliminate paperwork associated with legacy banking. It enables seamless customer acquisition and simplifies the customer journey while reducing the chance of fraud.
  • API Manager: API is a built-in accelerant designed to connect one app to another, or a third party. Modefin has developed an API management application that helps banks to “open up” when Open Banking becomes the norm.
  • Children Banking: Children Banking enables parents to open a digital account in the child’s name, set savings goals, and incentivize family chores to earn reward points.
  • Chatbot Banking: A chatbot is a computer program that can have a conversation with humans. Banks have been early adopters of this conversational banking trend. Using chatbots in banking is empowering banks to offer seamless service to their customers and both banks and customers can benefit from the chatbots.

Why the future of banking is in the cloud

Cloud migration is a top priority for 75% of the respondents in Celent’s Digital Panel Survey. As customers move to an online or mobile channel, improving customer experience will be enhanced through cloud migration. BAI Research says that more than 87% of customers will embrace more digital and online channels. According to McKinsey & Co., digital adoption has advanced by five years in the initial eight weeks of the pandemic.

In 2022, digital adoption by customers will increase further calling on banks to quickly evolve to more advanced digital channels using cloud computing to retain customer interest and loyalty. For most digitized banks, the near-term goal is to move their non-core systems to the cloud while maintaining core-banking data and systems on-premises. Banks have therefore drawn out a long-term enterprise-wide strategy to move operations to the cloud to enhance the customer experience.