Cloud computing and fintech – trends, risks and opportunities
Cloud computing in Fintech has emerged as a new trend that has shown effective results in the requirements of the financial sector and has given it a huge opportunity to grow. The global market size of the Fintech sector is expected to grow to USD 124.3 billion by the end of the year 2025 with a CAGR estimated at 23.84 percent.
Even as an increasing number of personal and professional transactions take place in the digital format, it has become important for established brands as well as Fintech startups to provide their customers with better services that include speed, reliability and security made possible through cloud computing as it makes storage of large and important data well secured and analyzed.
Cloud computing has enabled businesses to access a cost-effective solution for data storage and sharing options, with added benefits of secure storage, interoperability, scalability and 24/7 uptime. For the fintech sector, this comes with the added benefit of being able to operate across platforms/apps, and also to create customized experiences for customers worldwide.
Read also | Financial organizations need to implement multi-cloud strategies to excel today: Dhananjay Ganjoo, MD India & SAARC, F5
Some of the key cloud computing developments shaping the fintech sector are as mentioned below:
1) Geo-redundant cloud data centers
Unexpected disruptions such as storms, power outages or hardware failures can stop normal business operations, resulting in downtime and data loss. By allowing businesses to easily migrate critical applications and data to one of the geographically distributed secondary locations, geographic redundancy helps businesses maintain business continuity in the event of disasters. To be able to easily transition to a secondary location in the event your primary site fails or becomes unavailable, it is important to ensure that IT systems and applications that require high availability have geo-redundant setups.
2) Compliance with regulations
Regulations related to the banking sector, such as PCI DSS and PCI 3DS, are in force for all cloud service providers. Adhering to the minimum security requirements established by PCI DSS enables financial institutions and consumers to guarantee that the risk of loss from fraud and cyber-attacks is kept within acceptable limits.
3) Self-service applications
Without Cloud services, managing the financial data could have been challenging given its exponential growth. FinTech companies are now able to store and manage data securely and reliably thanks to cloud technologies. It also enables companies to use smart techniques for loans, payments and fraud prevention. It offers a highly secure platform, advanced engineering and configurable services that enable businesses to provide exceptional customer service.
4) Easy to implement managed machine learning
A key component in predicting economic trends is the use of machine learning algorithms in businesses. The use of ML algorithms by FinTech companies can help them predict market risks, spot potential business opportunities, lower fraud, etc. Large amounts of data including financial transactions, loan repayments, company shares, customer interactions, etc. can be used by companies to train their machine learning models.
5) Cloud Native
Rather than creating entirely new environments for application development, cloud-native enables enterprise creation of microservices that help reduce vendor lock-in and increase portability. Fintech organizations are able to innovate, roll out new services quickly and continuously provide pleasant experiences regardless of the amount of traffic hitting their systems due to the flexibility of cloud-based applications.
6) Quantum computing
Quantum computing in the fintech sector is increasingly recognized for solving critical issues such as cyber security, where it plays an important role in securing customers’ financial data using next-generation cryptography; financial data encoded with quantum cryptography is highly secure beyond current levels of digital security.
The risks associated with cloud computing in fintech are mentioned below:
1) Data security
A major concern for the Fintech sector is identity theft and data breaches. To protect the payment system, fintech companies use one-time passwords and other authentication techniques. Hackers are still successfully breaking into these systems and stealing financial and personal data. Because cyber attacks are becoming more sophisticated every day and it is difficult to provide total security in the digital world, financial institutions have always been at risk of data leaks.
Read also | Cloud, if managed effectively, will enable smooth transition of BFSI Infra: Raj Srinivasaraghavan, CTO, SecureKloud Technologies
2) Compliance
To protect the security of shared sensitive information, financial services businesses must comply with a variety of standards and laws. Compliance is a significant issue for fintech companies as it requires the deployment of strict security procedures to ensure there are no loopholes for hackers to exploit. Apart from that, compliance must not come at the expense of software and application performance. While certain restrictions apply uniformly to all financial institutions, others are specific to the business’s industry – for example, lending and borrowing, insurance, financial advice – and are thus only relevant to certain types of financial institutions. Financial institutions risk severe fines if they do not comply.
Fintech companies have understood how cloud computing’s agility potential can help them dominate the sector. Working with an expert in the field can further help fintech companies and businesses to not only optimize their solutions, but also gain an edge over the competition through customized innovation. Furthermore, expanding their influence by developing and offering cutting-edge products and services, Fintech companies can benefit Cloud data processing to establish seamless customer contacts and increase business income.
Views expressed by: Sachin Nigam, CTO and Co-Founder, Goavega Software Pvt. Ltd
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