Cloud Computing for Financial Services

Financial services professionals need to find new ways to interact with and support their clients. As generational wealth is transferring from older clients to their younger children and grandchildren, Millennial and Generation Z clients are using financial technology (fintech) apps to manage and monitor their wealth.

They're using investment apps like Robinhood and Acorns, banking apps from their favorite banks, and Mint and Prism for budgeting and bill paying. That also means they're depending less on wealth advisors and bankers to deal with most of their financial questions, and they're getting most of their answers and advice from their phones.

One way financial professionals are working to keep their clients is to adopt the same technology they're using. Some professionals are even going so far as to develop or license their own mobile apps as a way to give clients full transparency and interactivity with their money.

Other companies, like Accutech, are developing products like Cheetah and Moneytree for wealth managers and trust advisors to handle a lot of their workflow, which leaves them more time to spend developing client relationships and working on more clients' financial futures.

In the early 1990s, most of this work was handled on an individual's computer, as financial institutions bought individual licenses, or "seats," of their financial management software. Each computer had its own copy of the software, which meant dealing with individual problems as each person's computer was slightly different. Updates and upgrades were done one computer at a time, and a single rollout could take weeks to complete.

In the 2000s, institutions began to switch to in-house servers to run shared enterprise-level software. Those servers could sit under a person's desk or in a supply closet, but the power requirements and software soon outgrow these small servers, so companies built onsite server rooms with powerful rack servers to handle the workload.

This meant having a dedicated IT staff whose sole job was to keep the servers running. If a server crashed, no one could access the data — or get any work done at all — until service was restored.

Over the last several years, companies have switched over to cloud computing, which has been a game changer for financial institutions. They're able to run powerful software that can manage thousands of clients, analyze each person's performance, run artificial intelligence algorithms that can predict future performance, and provide some of the world's best cybersecurity to prevent theft.

What is Cloud Computing?

Cloud computing is the term for providing computer services over the internet. Instead of running applications on in-house computers, these programs are accessed through a direct internet connection between your laptop and the cloud server.

Cloud servers are much larger than your typical desktop or laptop computer. You can get a laptop that holds as much as 1 terabyte (1,000 GB) of data, or you can get a cloud server setup that can hold as much as several petabytes of data. (1 PB = 1,000 TB = 1 million GB).

It would take tens of thousands of dollars to have that much server space on your premises and would be wildly inefficient. That's why organizations rely on cloud service providers instead of onsite servers: Cloud computing for financial services saves time, money, energy, and staff resources.

For example, an onsite server room needs to run constantly, which uses a lot of energy. The more servers there are, the more power you use. The servers also generate a lot of heat, which means they need their own AC system, which also consumes a lot of energy. But if that AC system breaks down, you could overheat the servers. All told, your energy costs can be some of your biggest operating expenses, and there's no sensible way to cut costs that won't hurt your operability.

A server room takes up a lot of physical space, which makes it hard to expand, especially if you rent or lease your office space. You either have to knock out walls or move the entire office to a new location. So it's expensive to expand your server capacity. You can't just expand and add more servers once you run out of rack space in your physical office.

An onsite server presence also means dedicated IT staffers to keep it up. As your server requirements grow, you need more and more IT staff, which can get expensive. You'll also need several levels of staff, including management, which can become a big part of your overall operating expenses.

And most importantly, cloud servers are much more secure and less prone to successful data breaches than onsite servers. Since the rules and laws governing financial data are very strict and complex, financial institutions can't take any chances with cybersecurity. Cloud service providers offer much more robust cybersecurity measures than the average corporation can manage or even afford.

Bottom line cloud computing is a much more cost-efficient option, reliable, and safe option for running financial technology software.

The Benefits of Cloud Computing for Financial Services

There are several benefits for a financial services organization to use cloud computing over onsite servers.

First, cloud computing offers centralized data storage. It's possible to keep all of your clients' information, your employees' information, and any proprietary data in a single location. Normally, these different databases and spreadsheets are scattered throughout an organization, and found on different employees' computers. As a result, there are different versions of the same files and no one has a complete set of data.

Not to mention, people waste a lot of time tracking down lost or missing files. Some reports show workers spend up to 1.8 hours per day searching for documents. They're looking for missing reports, client information, analysis reports, and so on. By keeping documents in a single location, you can easily find the information you need. You can also limit access and permission for specific users, to ensure that only qualified staff members can see certain information.

Cloud computing also allows access from anywhere in the world. As the world learned during the pandemic, it became necessary to work from home for millions of employees. But the ones who were able to stay productive were the ones who had remote access to their company's information. Rather than returning to the office, many employers are discovering it's a lot more efficient and cost-effective to let employees work from home and continue to access all the data in the cloud.

Cloud computing also cuts down on actual paper files. You can reduce the amount of physical storage needed for all the paper files and folders you've kept in the past. Commercial real estate can be very expensive, and considering that most of the space is just to house filing cabinets filled with paper that no one has looked at in years, you can understand how cloud computing can actually cut back on your office costs and never require any physical space on your part.

You can automate core functions. There are administrative functions that have to be done, such as monthly reports, portfolio analyses, approvals and permissions, and investment recommendations, as well as HR functions like interviewing, onboarding, timesheets, and performance reviews. This lets your wealth and trust advisors spend less time on administrative work and more time on cultivating relationships with clients.

Fintech apps are cloud-based, rather than standalone applications. No more updating and managing software on a case-by-case basis. All updates and fixes are made by the developers, and they're usually done without disrupting your work. In the '90s and 2000s, updates would often disrupt day-to-day operations, which meant the updates and patches often wouldn't happen until it was too late — often with devastating results. Cloud-based applications are done smoothly and effectively with little to no interruption.

Cloud computing is scalable. Unlike physical servers, you're not limited by the size of your servers, the racks, or the rooms. You can upgrade to the optimal server capacity via the cloud provider's website. It's a lot less expensive than buying a new server, and you can expand capabilities in a few moments, rather than waiting for several days for the server to ship and get installed.

You can upgrade and downgrade as you need it, using extra processing power for creating annual reports or major data analysis projects. When you're finished, you can shut off the extra processing power rather than buying the extra servers and being stuck with them for the rest of the year.

Fintech apps are also browser-based, which means they can work on any web browser, with any operating system, on any device. You can access your fintech apps with Microsoft Edge on a laptop, Apple's Safari on an iPad, or Google Chrome on an iPhone.

Cloud computing is more secure. Most financial applications let you set the right kinds of access levels for all your staff. You can grant full access to the CEO and senior advisors, or limit access to certain kinds of information for junior advisors and support staff. This helps you protect your clients' financial information from outside data breaches and identity theft.

Finally, cloud computing for financial services gives you an advantage over your competition. Many financial institutions are clinging to the old methods of phone calls, emails, and in-person visits. But younger investors aren't interested in the old methods of contact. They want to be able to access and monitor their information on their phones and only speak to a human being when they have a problem or a complex question. So they're leaving the financial institutions that are still stuck in the 1990s and jumping to institutions that will meet them where they want to be: online and on their phones.

Why Cloud Computing for Financial Services is More Secure

Cloud computing lets your staff access all of your applications, data, and business processes from a single location. It works just like your in-house servers, but you don't need to keep the servers in your building. This is important for financial institutions with more than one office location or a company that lets employees work from anywhere.

A lot of financial executives don't feel comfortable with a cloud computing operation. They don't think it feels as secure as keeping onsite servers. After all, they can see the servers, they can lock the doors, and they can make sure no one gets into the building who shouldn't be there.

That's fine, except cyberattacks and data breaches aren't going to happen inside the building, they're going to come from outside, usually outside the country.

Think of it this way: Every computer is the cloud to someone else. Your servers are the cloud, even if they're in the same room. Your colleagues' computers are the cloud, even if you connect in the same office. The website you're reading this article on is the cloud. And if you access your laptop through your mobile phone, your laptop is still in the cloud.

That means your server is the cloud to everyone else. But an onsite server is much, much less secure than a cloud-based setup like the one we've described.

That's because the major cloud service providers — Google, Microsoft, AWS (Amazon) — have access to some of the world's most powerful and sophisticated cybersecurity software. It uses machine learning and artificial intelligence to learn how to repel attacks coming in from hackers and thieves around the world.

When the software experiences a new attack, it repels it, learns what is different, and understands how to fully repel the attack the next time it comes. Except that's happening hundreds, if not thousands, of times per minute. It's experiencing new attacks 24 hours a day, and it's learning how to repel those attacks, which helps it figure out how to repel future attacks as well.

As each server farm for each provider gets attacked, they synchronize the information, until the entire operation is learning from millions of attacks each year.

But an onsite server is not capable of that type of learning. For one thing, the price tag of this software is out of reach for most companies around the world. But even if you could install it on your onsite servers, they would only experience dozens, or maybe a few hundred, attacks per month.

That means there's little to no input for the AI system to learn from. It isn't experiencing all the data input that the giant cloud providers experience. So rather than learning from millions of attacks each year, it's learning from a couple thousand. And that means it's a lot less powerful and more prone to attack than its much larger counterparts.

And since small companies can't afford the same level of security software as the giant cloud providers, it is much more vulnerable to attack.

Conclusion

Cloud computing is already used in much of the business world. Human resources, oil and gas, scientific research, and business analysis all use cloud computing to some degree. It has changed the way organizations store and process information.

Financial services can greatly benefit from cloud computing. They can save money, time, energy, and staffing resources. They can streamline complex processes, manage more clients, automate basis analysis and financial projections. If you would like to learn more about cloud computing for financial services, we can give you a free demonstration.

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