Why should financial institutions upgrade to the cloud? We look at the benefits of cloud payments systems.
The future of digital payments lies in cloud-based services. According to Gartner, the cloud industry will be worth over $300 billion by 2022 and 34% of leading organizations consider cloud services an investment priority. The US currently leads adoption and accounts for over half the world’s cloud spending, with the United Kingdom and Canada following close behind.
As cloud-based services penetrate business sectors such as sales, marketing, and human resources, the need for a streamlined, seamless payments experience continues to grow. Financial institutions (FIs) need to stay up-to-date, rather than waiting for their outdated legacy systems to become obsolete.
Cloudification has many advantages for FIs, from advanced capabilities and features to heightened security and an end-user experience that can evolve with newer technologies.
Financial organizations have long relied on on-premise legacy systems and dedicated IT staff. As cloud-based systems become more prevalent, maintaining aging hardware along with on-site experts is quickly losing its profitability. According to Nextgov, the US government's ten most out-of-date legacy systems cost taxpayers over $330 million per year to operate and maintain.
Legacy systems are also plagued by the need to meet new performance benchmarks, vendor support challenges, and potential security vulnerabilities. With cutting-edge technology and processing power now offered as a pay-as-you-go, as-needed service, there is no longer a need to maintain risky infrastructure.
Cloud-based services reduce or even remove maintenance costs essential to on-premise legacy systems and offer upgrades that can meet rigorous HIPAA, PCI, SOX and other regulatory compliance standards.
Security is a constant concern for customers and payments professionals alike. FIs must evaluate the viability and fitness of their legacy systems as they work to maintain Payment Card Industry Data Security Standard (PCI DSS) compliance.
The cloudification of payments allows for a more robust standard of security with sophisticated tools such as firewalls, antivirus and anti-malware, data loss prevention, and email security. Constant cloud updates and multi-layered security measures ensure data privacy and security while reducing the risk of digital social engineering.
Cloud-based payment systems also enable better user management. Customers can expect user-friendly experiences that are both responsive and convenient. Organizations may also find the payment cloudification streamlines internal processes, allowing for configurable onboarding.
Features such as single sign-on (SSO) can strengthen overall system security while lowering IT support costs and increasing customer satisfaction.
Payments systems must be able to support a wide range of volume throughout the fiscal year. Redundant capacity can be costly and FIs need a reliable system that would be subject to sudden failures. Cloud-based systems offer more flexibility than traditional point-of-sale (POS) technology and its scalability makes it a resilient solution.
The cloud combines seamless data integration with mobile accessibility. Cloud-based systems can integrate payments systems with accounting and management software, reducing surplus recurring tasks such as data entry. Data integration also allows FIs to augment the customer experience with personalized features and create a more efficient transaction process.
US mobile transactions are estimated to grow 36.6% year over year through 2022, creating an unprecedented demand for accessible digital payments. Upgrading to a cloud-based system protects organizations from losing competitive ground and responding to ever-changing customer needs.
The ability to adopt, and adapt to, emerging technologies has never been more crucial for financial institutions. Mobile transactions are just one indication of the driving demand for immediacy in digital payments.
Digital payment methods are also spreading to smart devices such as TVs and watches while systems leveraging artificial intelligence (AI) and the Internet of Things (IoT) are gaining traction. A PYMNTS survey found that 73% of banks with over $100 billion have budgeted over $50 million to maintain existing machine learning and AI systems. 82% of banks will be increasing their investments in the near future.
On-premise systems provide little long-term agility or chance for long-term market disruption. As more business and financial sectors embrace digital transformation, FIs can expedite the adoption of innovative solutions and drive continuous improvement through cloud migration.
Cloud migration is without a doubt the future of digital payments. Adopting a cloud-based payments system is a difficult decision for financial institutions who may still have concerns about security and compliance risks. But as regulations evolve and data privacy and protection become more complex, legacy systems will no longer be able to support or meet new requirements.
Embracing the cloudification of payments can position FIs at the forefront of their industry, giving them the ability to evolve both with emerging technologies and customer demand.