Corporate banks may not deal with as many clients as retail banks, but the stakes involved in doing business with corporates and enterprises are often substantially higher. Despite this, innovations in corporate banking have largely followed those of retail banks, particularly in the types of back-end systems employed.
Today, corporate banks are increasingly turning to cloud-based technologies to form the basis of most of their banking systems. While cloud solutions have been around for quite some time, they have matured significantly in the past decade, to the point that they are now demonstrably superior to traditional onsite solutions in most cases.
Generally speaking, modern corporate banking cloud solutions from different bank system developers are available under three different models: SaaS, IaaS, and PaaS. These services are often confused with each other, as they can be very similar to the point that they are often used interchangeably. However, each service model has a unique set of features and advantages.
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Here, we’ll briefly describe the three basic cloud service models:
SaaS (Software as a Service).
These services allow customers to access the vendor’s software online. Strictly speaking, banks do not need to install any software on local devices to use SaaS, though they may need to occasionally for a customized experience. SaaS software is accessible from any permitted internet-capable device, and the bank does not have to host any of the system components locally. SaaS offers are highly popular among financial institutions because of the easy scalability, high service availability, and automated system updates.
IaaS (Infrastructure as a Service).
Under an IaaS model, virtualization technology is used to deliver computer resources such as data storage, network infrastructure, connectivity, and servers to financial institutions. IaaS can be considered to be a cloud-based alternative to having one’s own data center. In this setup, the vendor maintains the infrastructure but the bank has control over the system. Unlike in SaaS systems, banks are responsible for installing and maintaining banking software. They are also in charge of data security, operating systems, and other applications needed to deliver services to clients.
PaaS (Platform as a Service).
Under a PaaS model, vendors offer tools that could be used by bank development teams to develop, test, and launch bespoke software systems. The PaaS vendors manage the virtual infrastructure, operating system, data backups, updates, and security, while the banks focus on data management and app development.
These are just the basic cloud solution service models corporate banks could adopt. Typically, the level of control given to clients can be specified in the service agreement. Additionally, many banks may prefer a hybrid system where some components of their system remain self-hosted.
Benefits of Adopting Cloud Solutions
Whether the bank chooses a completely or partly cloud-hosted system, they stand to enjoy a range of benefits. These include the following:
Better Data Security.
Over the years that cloud-hosted banking systems have been available to banks, they have been safer for banks in terms of data security. In cases where vendors are responsible for data hosting and infrastructure, data losses are much less of a risk compared to if the bank self-hosted the data. This is mostly down to the scale that is available to cloud system vendors, which allows them to manage and secure data much more efficiently compared to most banks.
More Flexibility.
The deployment of cloud systems frees corporate banks from having to rely on physical locations to facilitate business. In theory, corporate banks that use cloud systems may even go fully digital, serving all of their clients online. They may not even need offices for back-office employees, which allows for reduced overhead costs and more flexible employment arrangements.
Improved Service Levels.
Contracts for cloud-based systems tend to have service-level agreements (SLAs), where the vendor has to guarantee a specific level of availability or is forced to pay penalties. These SLAs incentivize vendors to constantly improve service efficiency and uptimes, ultimately benefiting corporate banks and their clients.
Interconnectivity.
Established cloud service vendors will often offer a suite of compatible enterprise resource management (ERP) and customer relationship management (CRM) solutions that corporate banks could readily use. Integrated cloud-hosted CRM software is especially beneficial as it gives corporate banking institutions timelier, more relevant options for managing the experiences of high-value customers.
Lower Maintenance and Labor Costs.
Regardless of whether they choose the service to be delivered as SaaS, PaaS, or IaaS, cloud-based systems can free banks from the labor and upkeep requirements needed to maintain exclusive onsite capabilities. These systems can empower corporate banking institutions to focus on their core strengths rather than on the minutiae of data management and legal compliance. With the right cloud services, corporate banks can sustainably expand their capabilities with a smaller team.
It’s Time for Corporate Banks to Move to the Cloud
Cloud-based banking technologies are now mature solutions that offer corporate banks a range of serious benefits. SaaS, PaaS, and IaaS systems are now available to meet virtually every banking need. Today, rather than asking if it’s time to move to the cloud, the question corporate banks should be asking is how they want their cloud solutions delivered.