Cloud computing offers various services delivered through the internet, including data processing, storage, and management, helping businesses in the Financial Sector (from startups to established players) lower operating costs while improving scalability and flexibility.
Its agile nature is why many businesses increasingly prefer cloud computing over conventional, on-premise hosting for data storage and processing, with many businesses having experienced streamlined operations and optimised processes, thanks to the cloud’s capabilities.
Below, we explore the emerging trends and technologies shaping the future of cloud connectivity and efficiency, and what impact these will have on operational processes for businesses in the Financial Services industry.
The Current State of Cloud Connectivity
We can’t get into the future of cloud connectivity without first talking about the current state of this technology. If you’ve ever, in the course of your business operations, used Dropbox or Google Drive for file storage, Google Docs for collaborative document creation and editing, or Slack for team communications, then you’re already using cloud computing in your own organisation.
Industry leaders like Google, Amazon, and Microsoft are constantly competing to improve their products, increase their reach, and expand their service offerings, in a bid to become the market leader in the fast-growing cloud computing sector.
The advent of the COVID-19 pandemic at the start of this decade further accelerated the growth of this sector, as more and more businesses shifted to a work-from-home model and consequently increased their spending on cloud infrastructure, which is both cheaper and more scalable than traditional solutions.
Cloud migration is expected to continue in the foreseeable future, as businesses seek to improve security and lower costs by modernising their IT infrastructure. A thoughtfully structured cloud adoption strategy can help businesses overcome some of the key connectivity challenges they’re currently facing, including data security concerns, compliance issues, high costs, vendor lock-in, and network latency issues. But once they’ve successfully made the move to the cloud, the trends and technologies starting to emerge in the space promise an increasingly optimised future for business operations.
The Evolution of Cloud Connectivity
Driven by advancements in networking technology – such as SDN, edge computing, and 5G – cloud connectivity has evolved significantly over the years. In this section, we’ll dive a bit deeper into this evolution and the impact of some of these changes.
Software-Defined Networking (SDN)
SDN technology employs software-based APIs and controllers to direct network traffic and communicate with underlying hardware infrastructure. This replaces the traditional method of using switches, routers, and other dedicated hardware devices to communicate and control network traffic.
This evolution in cloud connectivity has allowed for many benefits, such as:
- Greater control over the flow of network traffic
- Increased flexibility in the choice of networking equipment
- More customisable network infrastructure
- Improved security and a more holistic view of security threats
- Immediate quarantining of compromised devices
Edge Computing and Low Latency Connectivity
This is a relatively new, distributed IT architecture wherein computation and data storage are brought closer to the original source of the data. This helps reduce the reliance on traditional, centralised data centres since the data is being processed at the peripheries of the network.
Storing and processing data at these ‘edge locations’ helps reduce bandwidth usage and improves response times. When used in conjunction with cloud connectivity, this can lead to:
- Improved bandwidth efficiency, since edge computing can reduce the amount of data that needs to be sent to the cloud.
- Reduced latency, because data is stored and processed at the edges of the network instead of a traditional data centre.
- Increased reliability, as edge computing lowers the burden on traditional data centres, thus reducing the risk of network disruptions and outages.
Cloud Connectivity Trends
Three of the most significant emerging trends in the realm of cloud connectivity are:
Multi-Cloud and Hybrid Cloud Strategies
A hybrid cloud approach involves combining a private cloud (hosted via an on-premise data centre) with a public cloud such as Microsoft Azure or Google Cloud.
Some advantages of a hybrid cloud infrastructure are:
- It helps minimise latency and improves agility.
- It protects the sensitive data on your private cloud.
- You can meet regulatory requirements like GDPR more easily.
Multi-cloud essentially involves companies using multiple cloud providers concurrently – such as Google Cloud, AWS, and Microsoft Azure – to avoid overreliance on any one platform. This approach has certain benefits, such as:
- It creates some much-needed redundancy
- Downtime risk is significantly reduced
- It increases the resilience of the cloud ecosystem
- Migrating applications over to new platforms is streamlined
- It facilitates the swift adaptation of cost-effective alternatives
Zero-Trust Security Models
This is a cybersecurity model that protects data, applications, and networks by eliminating the assumption of ‘implicit trust’, which posits that internal users are inherently trustworthy while any user outside the corporate network perimeter is a security risk.
The zero trust model constantly verifies user identity and access, even that of internal staff, leveraging a least-privileged access strategy which only gives each user sufficient access rights to perform their job, and nothing more. This involves monitoring all traffic while also segmenting and controlling access of all users, regardless of their location.
Since digital assets are distributed across various external data centres in a cloud environment, zero trust is crucial for maximum data security. Some of the major benefits of adopting zero trust are:
- It supports compliance auditing
- Sensitive data stored on the cloud is protected
- It lowers the risk of a security breach and speeds up detection time
- It enables better control of a cloud environment
Data Sovereignty and Compliance
With the growing adoption of cloud connectivity around the globe, many countries have implemented data sovereignty laws that businesses need to comply with when operating in those countries.
- Countries with data residency requirements mandate that sensitive data (including the personal and financial data of their citizens) must be stored within their borders.
- Some countries with data transfer restrictions have made it illegal to transfer sensitive data outside the country, which can make it tricky to use cloud providers headquartered abroad.
- The data access laws of a country can give its law enforcement agencies the right to access data stored in the cloud, whether it’s stored within the country or abroad.
In order to ensure regulatory adherence and data protection, businesses should choose cloud providers and platforms that offer data residency options in the countries where the business is operating, which includes data encryption, sovereignty locks, and other security measures; as well as strict access controls.
Future Technologies Shaping Cloud Connectivity
Below we explore some of the key technology trends that are shaping the future of cloud connectivity in the Financial Services sector:
Artificial Intelligence (AI)
Businesses in the financial industry can use AI to enhance the efficiency and security of their cloud infrastructure by:
- Automating manual tasks related to managing cloud connectivity– such as monitoring, troubleshooting, provisioning and scaling resources, and detecting security threats
- Monitoring and optimising the performance of a cloud infrastructure in real-time, preventing outages and reducing latency.
- Analysing transaction patterns to detect and identify fraudulent activity. This is specifically important for businesses in the financial sector often targeted by cybercriminals.
In short, AI will play a key role in shaping the future of cloud connectivity and how it’s used by companies in the financial industry.
Blockchain and DLT
Combining cloud connectivity with blockchain and Distributed Ledger Technology (DLT) can allow Financial Services companies to increase their security and efficiency when processing large volumes of data, such as through:
- Immutable records: Blockchain technology is known for being highly secure, transparent, and immutable. So it can help financial institutions ensure data integrity and establish an unalterable and tamper-proof record of transactions.
- Smart contracts: Self-executing smart contracts embedded within the blockchain can enable financial institutions to automate time-consuming processes like trade settlements, loan disbursements, and insurance claim settlements.
- Regulatory compliance: Blockchain technology, integrated with a company’s cloud infrastructure, can facilitate compliance by providing auditors with an immutable and tamper-proof record of transactions. Blockchain can also be leveraged to demonstrate compliance with Know Your Customer (KYC) and anti-money laundering (AML) regulations.
Serverless Computing
Serverless computing allows software developers to build and operate applications without needing to manage the backend cloud infrastructure, which is provided by a cloud vendor on a pay-as-you-go basis. This makes it easy for developers to follow cloud-native development practices and write code designed to perform specific functions unique to cloud platforms, such as containerisation and microservices.
Some other benefits of serverless cloud computing are:
- Cost efficiencies: Serverless computing leads to reduced costs since businesses only pay for the resources they use under the pay-as-you-go model. This can be especially useful for startups and small businesses with variable workloads.
- Scalability: Serverless computing can help you better handle spikes and dips in traffic, by automatically scaling resources up or down based on demand.
- Speed: As software developers don’t have to worry about scaling up or managing the underlying cloud connectivity infrastructure, serverless computing can help businesses develop and deploy new applications more quickly.
By delegating all routine infrastructure upkeep and management activities to cloud providers, serverless computing allows businesses to reduce costs while focusing on providing their clients with the best possible services and solutions.
Unlocking Growth: The Impact of Cloud Connectivity on Business Success
The increasing innovation emerging in the cloud connectivity space is particularly pertinent to the FinTech and Financial Services industries, where being on the cutting edge of technological efficiencies enables greater competitive advantage. Here are some of the key benefits evolving cloud connectivity offers these industry verticals:
- Agility and responsiveness: For FinTech and Financial Services businesses involved in stock and cryptocurrency trading, for example, a single second can mean the difference between success and failure. With cloud connectivity, businesses like these can respond quickly and nimbly to market changes and movements and adapt to fast-changing customer demands in a fraction of the time.
- Cost efficiency: Like other industries, maximising cost savings in favour of more pressing business expenditure is a priority for many Financial Services businesses, and cloud connectivity enables just that. Thanks to scalable services and pay-as-you-go pricing models that negate the need for hefty upfront investments into infrastructure, businesses can cut costs considerably.
- Security and compliance: In an industry dominated by stringent security and compliance obligations, the robust security measures available through the cloud can streamline security for Financial Services and FinTech businesses, helping them to meet regulatory requirements more easily and confidently.
- Access to advanced technologies: Cloud connectivity provides an easily accessible path to more advanced technologies that can help FinTech and Financial Services businesses improve their offerings and differentiate themselves in the marketplace. Leveraging technologies like AI, machine learning, and advanced data analytics enables greater innovation and competitive advantage for businesses in the financial sphere.
- Business continuity: In a fast-moving, always-on world, business continuity is a high priority for the FinTech and Financial Services industries. Cloud-based disaster recovery capabilities can help businesses ensure their data is regularly and properly backed up while enabling uninterrupted operations during both planned and unplanned disruptions.
- Enhanced customer experiences: Another key consideration for businesses looking to increase their market share, modern cloud-based applications allow for improved customer experiences through features like online banking and real-time transactions, creating a more holistic and efficient customer experience that increases customer loyalty.
The Road Ahead
Greater adoption of cloud connectivity by the financial industry will lead to further improvements in the next five to ten years. Below are some examples of how these changes are set to further optimise business operations in the Financial Services sector.
Greater Speed
Cloud connectivity is expected to become faster and more reliable with the development of 5G and similar technologies because 5G can enable a speedier transfer of data to and from the cloud.
5G also offers lower latency and increased reliability. Lower latency can help improve the user experience when it comes to real-time applications such as stock or forex trading and real-time payments and transactions. Increased reliability, on the other hand, means fewer outages and dropped connections, which is essential for businesses in the financial sector that rely on cloud computing for critical functions or applications.
Enhanced Automation
The rapid development of AI is expected to bring about greater automation in the realm of cloud connectivity. For instance, AI is already being used to automatically provision cloud resources based on demand, which helps to reduce costs and improve efficiency.
In the future, AI can also be used to constantly and automatically monitor the performance of a cloud infrastructure and all the applications it supports, to identify and resolve potential problems before they cause a disruption or outage. AI can also help automatically detect and respond to security threats in a cloud environment, and improve the efficiency of cloud data management by automating tasks such as data archiving, backup, and recovery.
Tailored Solutions
Tailored cloud connectivity solutions will emerge that cater specifically to the needs of the Financial Services sector. Many cloud providers working with businesses in this industry already offer features such as data loss prevention, intrusion detection, and end-to-end encryption, helping Financial Services businesses adhere to strict security regulations.
In the coming years, more and more Financial Services companies will adopt a multi-cloud strategy to improve the security, performance, and reliability of their applications. They will also invest in a tailored cloud security stack with an assortment of security solutions designed to protect their particular cloud environment.
Summary
Cloud connectivity is set to further reshape the Financial Services landscape with the latest advancements such as zero-trust security models, multi-cloud strategies, edge computing, and Software-Defined Networking (SDN).
At the same time, the integration of new technology trends like blockchain, AI, and serverless computing into the cloud infrastructure will further increase the speed, efficiency, scalability, and security of cloud-based applications and solutions – benefiting both clients and businesses in the financial space.
Prepare for the Future of Cloud Connectivity with BSO
BSO Cloud makes cloud connectivity effortless, thanks to our collaborative approach to building and maintaining cloud services that meet your specific business needs. With Infrastructure as a Service, private cloud, object storage and managed services solutions, we offer high-quality, cost-effective, and secure cutting-edge cloud connectivity tailor-made to help Financial Services companies achieve greater success.
If you’d like to learn more about the cloud connectivity solutions available for your needs, download our Ultimate Cloud Services Comparison Guide. Alternatively, you can view our Cloud Connect or Cloud-to-cloud solutions, or contact our team directly.
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