Cloud Computing in Finance

What is cloud computing?

Using the Internet to deliver computing services including servers, storage, databases, networking, software, analytics and intelligence is referred to as cloud computing.

Cloud computing is a type of technology that is available to anyone with an internet connection. It is possible to access this platform solely through an internet connection, without the requirement of any hardware or software.

Many organizations of every variety, ranging from big to small and from various sectors, are taking advantage of the cloud for diverse applications, like data storage, contingency planning, virtual desktops, software innovation, investigating excessive amounts of data, etc.

One example is hospitals taking advantage of cloud technology to create individualized therapies for their patients. Likewise, banking firms are taking advantage of cloud technologies to detect and stop fraud in a more expedient manner.

The forecast for the cloud computing market size is that it will reach an estimated value of 405.3 billion dollars in 2022, and by 2028 it is predicted to grow to 1.465 trillion dollars.

History of cloud computing

The beginnings and growth of cloud computing can be traced back to the 1950s and 1960s. During the 1950s, businesses began to employ large mainframe computers. But, since it would have cost a lot of money to purchase a computer for each person, people came up with the idea of time sharing during the 1950s and 1960s.

The capability of sharing time between several computers and the mainframe was enabled. The mainframe had a greater amount of storage and computing power in comparison to the other computers.

Therefore, by linking the mainframe to other computers, it was made possible to distribute the mainframe’s memory and CPU over the connected computers.

The use of time sharing allowed for more cost-effective usage of processor time on large mainframe computers by linking them to other, multiple computers.

The first virtual machine was introduced in the 1970s, causing cloud computing to become more prevalent. This allowed users to have numerous computing systems within one physical set up.

Virtual machines had a great impact on the idea of virtualization, leading to advancements in cloud computing.

In a 2021 survey by Google , it was found that:

93% of exchanges, trading systems and data providers offer cloud-based data and services.
67% of commercial and investment banks consume cloud-deployed market data.
90% of surveyed buy-side firms consume cloud-deployed market data, mostly for portfolio management.

Research performed by Cybersecurity ventures has determined that the total size of global data storage on the cloud should reach 100 zettabytes by 2025. A zettabyte is equivalent to 1 billion terabytes or 1 trillion gigabytes.

Types of cloud services

Cloud computing can be acquired in three distinct forms: Software as a Service (SaaS), Platform as a Service (PaaS), and Infrastructure as a Service (IaaS). Although they are often depicted stacked on top of each other, any single provider can provide any single one of them.

As an illustration, a company can provide a Software-as-a-Service (SaaS) setup for trading capabilities without utilizing Platform-as-a-Service (PaaS) or Infrastructure-as-a-Service (IaaS) platforms. You can use IaaS to run a program and directly access it without needing SaaS.

Let us learn more about each model further.

Software as a service (SaaS)

Individuals can obtain access to application programs and information storage systems via the software as a service (SaaS) structure. Cloud suppliers are in control of the framework and bases that power the programs. In the SaaS configuration, the cloud vendor installs and operates application programming on the server and end-users of the cloud can access it by using the cloud provider.

Platform as a service (PaaS)

On PaaS, cloud services give an environment usually involving a functioning system, a program language working environment, a data source and a web hosting server. Rather than purchasing and keeping up the concealed equipment and programming layers, application software engineers create and run their programming on a distributed computing platform.

Infrastructure as a service (IaaS)

IaaS, otherwise known as infrastructure as a service, is a type of web-based service which provides broad applications that hide the detailed specifics of the network framework, such as physical computing hardware, location, partitioning of data, expansion, security, and backups.

Types of cloud computing deployment models

The cloud computing models are of three types. Let us see what are those three types briefly:

Private Cloud

A private cloud is a type of cloud computing wherein an organization utilizes proprietary engineering and runs cloud servers within its own facility.

Hybrid Cloud

This cloud computing model is a combination of both private cloud services and third-party public cloud services, with the two platforms configured to work in synchronization.

Public Cloud

A third-party provider makes computing resources available online for anyone to use, which is known as public cloud computing. Enterprises do not need to establish and manage their own cloud servers internally when leveraging the benefits of the public cloud.

Example of cloud-based trading platform

A cloud-based trading system provides versatility and assurance of operations by enabling traders to work from any location. Trading platforms that are operated through the cloud make the process more efficient and cost-effective by providing a connection through cloud solutions.

Here is an illustration of a cloud-based trading platform, which is Blueshift.

Blueshift offers an uncomplicated way for anyone, from any location, to have access to the kind of infrastructure needed for carrying out investment research, backtesting and algorithmic trading, and it is absolutely free. Additionally, there is a currently existing alpha variation – a super-speedy backtracking system with information on an individual minute basis spanning various asset categories and markets.

When using Blueshift, you must decide on the specific dataset you want to work with prior to running a strategy for backtesting. You must pick a dataset consistent with your strategy.

To put it another way, if you’ve put together a plan for trading Apple, you should select the data from the New York Stock Exchange to ensure it runs without any glitches. At present, we have the following datasets available for research/ backtests):

Equities and ETFs market data for the US market and India – minute levels with corporate actions. Updated once every day after market close.
Futures data for NSE (India) monthly futures (first three contracts) – minute levels with adjustments. Updated once every day after market close.
FX data – 10 currency pairs – AUD/USD, EUR/CHF, EUR/JPY, EUR/USD, GBP/JPY, GBP/USD, NZD/USD, USD/CAD, USD/CHF, USD/JPY. Minute-level data is updated once every day.
Crypto data – 9 coins against Tether (USDT) and Indian Rupees (INR), also includes USDT/INR. The nine coins are BTC, ETH, ADA, BNB, MATIC, XRP, SOL, DOT and LUNA. You must specify them as pairs, either against USDT (e.g. BTC/USDT) or INR (e.g. BTC/INR).

You can explore your concepts, evaluate them using historical data, and then put your plans into action with a broker that you have chosen to work with on Blueshift.

Traders may use Alpaca, FXCM and MASTERTRUST to conduct live transactions through the Blueshift platform. Brokers Alpaca and FXCM can be utilized for trading on paper.

Benefits of cloud computing for banks

Emphasizing the advantages of cloud computing in the banking sector is significant as financial establishments progress further into an IT cloud infrastructure in a measured but consistent way.

Better data security

Cloud computing for banks can be an especially secure way of running operations, as the software is consistently modified and kept up-to-date. However, ensuring that the intent is met, it is very important to choose a cloud computing service that meets the following criteria:

Compliance and certifications
Performance and reliability
Next-gen technology inclusion
Migration support
24*7 service support

Lowered infrastructure cost

No definite data is available, yet across the world, banks remain dependent on internal systems. By depending on this technology, it is possible to protect users’ information, but an issue that arises is how difficult it is to adjust it to fit organizational changes. Any alterations to the IT system, workload organization, etc. require a certain period of time, leading to huge pause in operations that could be experiential by customers.

By utilizing cloud services for banks, the adjustments to the IT infrastructure are easier to handle, and institutions can quickly expand their services.

Greater operational efficiency

A cloud system boosts the effectiveness of a bank considerably. By hosting their services on cloud, banks can enjoy benefits like:

Quality control
Disaster recovery
Flexibility
Loss prevention
Risk management

Banking institutions are able to lower their fixed and variable costs while assuring 99% availability rate by using cloud-based portals.

Access to software applications

Banking institutions are able to take advantage of cloud computing in order to get their hands on CRM and ERP software applications, both of which are designed to improve customer service and employee satisfaction. As these applications fall under the Software as a Service structure, the banks have full sovereignty regarding which data goes into them and the opportunity for customization.

Contributes towards business continuity

Banking firms find cloud computing beneficial since it allows them to gain increased levels of fault tolerance, data protection, and recovery from disasters. In addition, cloud computing offers a large amount of redundancy and backup at a low expense. Banking institutions are in possession of all the components necessary to make them ready for the future.

The cloud’s availability on demand reduces the amount of infrastructure that needs to be invested in, and consequently lessens the time taken to get the service running. This serves to reduce the time required to bring out new products, enhancing productivity and allowing for a faster response to customers.

Usage-based payment

The banking industry has a long-standing fear of new technologies. Concerning the adoption of new technology, cloud provides them the liberty to employ the service through a pay-for-what-you-use scheme.

Green IT

Moving banking operations to the cloud decreases energy usage as well as the release of carbon dioxide. The result of this is that it reduces inactive periods, making the use of computing power highly effective.

Now that we have considered the clear advantages of cloud computing for the financial industry, it is time to decide upon the best cloud services for banks.

Choosing the best cloud computing model for financial services

Cloud computing gives banks the option to shift from a model of large capital expenditure to an adaptive business model that decreases operational expenses while ensuring data security is the top concern. Choosing a suitable cloud computing model is the cornerstone of attaining success in the incorporation and development of cloud computing.

There are three main kinds of cloud computing services that financial institutions can choose from when creating a cloud banking ecosystem.

Cloud service models:

Software-as-a-Service (SaaS) is a type of cloud service that allows users to utilize business software and any associated data from an internet browser. Using SaaS, businesses have the capacity to host use cases such as customer relationship management, bill generation, accounting, service desk operation, and content administration.

This cloud type focuses on supplying everything needed for the development, testing, and deployment of applications, user interfaces, and databases. Banks are able to make the development process more efficient and reduce expenses on technology and the need for physical computers and software.

Instead of buying their own software, data centers and servers, banks can use the Infrastructure as a Service cloud model to access and utilize these resources from an outside source.

[ Also Read : IaaS vs. PaaS ]

Cloud deployment models:

A cloud infrastructure specifically dedicated to one organization, such as a bank, is known as a private cloud. It is generally overseen by the bank itself or someone from outside the bank who operates from their location. It is generally suggested that banks utilize a private cloud to provide their services, as this offers them more authority and greater suppleness. The risk of a security breach is reduced when a private cloud is set up behind the firewall of a company.

This infrastructure is available to the entire banking sector to use and is maintained and operated by the organization that provides cloud services. If financial institutions are searching for efficiencies of size, they should consider using the public cloud.

A hybrid cloud is a type of infrastructure that involves both a private and a public cloud, which each work to serve their own respective purposes.

Cloud operating models:

This model provides banks with instant access to a devoted group of centers and facilities to help with their virtual operations.

In the staff augmentation model, financial institutions can acquire cloud proficiency by employing personnel with the required abilities. The group is housed within the organization and this gives them the ability to swiftly address requests as they come in.

This strategy utilizes offshore locations and personnel to operate the cloud functions. Under this system, facilities and personnel often serve several banks.

This is a list of cloud models accessible by a banking establishment. Figuring out which cloud strategy to go with can be a difficult decision for those just starting out. Let us make it easy for you. These are the cloud solutions we usually consider when we increase a BFSI company’s digital footprint.