Is This the Banking System for the Future? Why Cloud-Based Banking is the Key to Financial Inclusion

What is Cloud Banking?

Banking service known as "cloud-based banking" makes use of cloud computing to deliver services from banks.

Cloud computing refers to the usage of a shared network of distant servers that are hosted and managed by a third-party cloud service provider, as opposed to the actual computers and servers that are housed on-premises at a bank.

With this strategy, the bank can provide a variety of advantages to its clients, including increased flexibility, scalability, and cost savings. For instance, cloud-based banking enables users to access their accounts and conduct transactions using any internet-connected device from anywhere on the globe.

Is Cloud Banking Safe?

Most often, when people hear "third-party management systems," they believe them to be less safe than alternative services. 

Well, you couldn't be more wrong. When it boils down to security, cloud service providers prioritize security more. 

To put it in perspective, cloud storage providers ensure the latest security protocols and encryption systems such that even if your storage is hacked, the data will be unreadable.

This has prompted many banks to transition to cloud-based banking.

Moreover, cloud computing banking allows banks to adjust computer resources according to consumer demand, which may help them save money and operate more effectively. 

This is because the cloud service provider handles all hardware and software upgrades and maintenance, which may be costly and time-consuming for banks to do on their own.

Banks and cloud service providers always ensure that all regulatory requirements are met to protect their customer data and ensure maximum security at all times.

Here are some pros and cons of cloud computing in banking.

Pros of Cloud-Based Banking

1. Scalability: Banks can scale up or down their operations on business needs thanks to cloud-based banking. Banks don't need to spend money on expensive gear or software to rapidly and easily add new services or features to their offerings.

2. Cost-effectiveness: Banks can now lower their capital expenditures for IT infrastructure, upkeep, and updates with the aid of cloud-based banking. Banks may save money and manage their expenditures by paying for cloud-based services as they are used.

3. Flexibility: Cloud computing in banking offers greater flexibility in terms of access to banking services. Customers can access their accounts from anywhere, anytime, using any device with an internet connection.

4. Improved Security: Cloud-based banking has increased the overall security of the financial industry. Banks have reduced the risk of cyberattacks and data breaches by storing their data in safe cloud environments that are guarded by numerous levels of protection and encryption.

According to IBM, cloud services have ensured a reduction of up to 80% on fraud control infrastructures while at the same time scaling the system as client usage grows.

The cons of Cloud-Based Banking.

Dependency on the internet: Cloud-based banking requires a stable and reliable internet connection. Any disruption to the internet service can result in downtime and disruption of banking services.

Potential Data Privacy Concerns: Cloud-based banking requires the storage of sensitive financial data on remote servers, which can raise data privacy concerns.

Vendor Lock-in: Cloud-based banking can result in vendor lock-in, making it difficult for banks to switch to another provider if they are dissatisfied with the service.

Cloud-Based Banking in Africa and Nigeria

Access Bank: Access Bank is a Nigerian bank that has been using cloud-based technology since 2018 to provide digital banking services to its customers. The bank uses Microsoft Azure, a cloud computing platform, to host its banking services.

Standard Bank: Standard Bank is a South African bank that has been using cloud-based technology since 2018 to provide digital banking services to its customers. The bank uses Amazon Web Services (AWS), a cloud computing platform, to host its banking services.

Ecobank: Ecobank is a pan-African bank that has been using cloud-based technology since 2016 to provide digital banking services to its customers. The bank uses Microsoft Azure to host its banking services.

Sterling Bank: Sterling Bank is a Nigerian bank that has been using cloud-based technology since 2018 to provide digital banking services to its customers. The bank uses Amazon Web Services (AWS) to host its banking services.

UBA: United Bank for Africa (UBA) is a Nigerian bank that has been using cloud-based technology since 2018 to provide digital banking services to its customers. The bank uses Microsoft Azure to host its banking services.

These are just a few examples of banks in Nigeria and Africa that are using cloud-based banking systems. Many other banks in the region are also exploring or implementing cloud-based banking solutions as they look to improve their banking services and customer experience.

Why Cloud Computing Banking is a good idea for the financial system in emerging nations.

For the financial systems of developing nations, cloud-based banking can be very helpful for several reasons:

1. Cost savings: Banks in poor nations may have large capital investment costs for IT infrastructure and upkeep. Cloud-based banking can assist these banks to avoid incurring these costs.

2. Scalability: The financial systems of developing nations frequently grow quickly, making it difficult to keep up with the demand for additional services and features. Banks can grow their operations rapidly and affordably thanks to cloud-based banking.

An example is the cash scarcity in Nigeria which made a large part of the population take their financial transactions online at the same time. Most banks' systems were not built to withstand the traffic hence the reason for downtime in Nigerian banks.

Technological Access: Cloud-based banking may provide banks in developing nations access to the newest technology, allowing them to enhance their operations and customers' experiences.

Overall cloud-based banking has come to stay, and systems built on this platform are tipped to enjoy success in financial services provision, securing them for the future.