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Clearing up the cloud picture for community banks

Security, performance, service: What you need to know about cloud solutions

INSIGHT ARTICLE  | 

For community banks, IT solutions through the cloud offer a number of compelling benefits. They can:

  • Reduce the complexities of managing IT
  • Allow banks to affordably add capabilities
  • Assist with regulatory compliance

However, many financial institutions are still uncertain of the best way to capitalize on the benefits of the cloud.

Consider the vital role IT plays in your current competitive and regulatory environment. You’re increasingly reliant on various applications for production, security and regulatory compliance. Yet the investment in both technology and the in-house expertise to manage and leverage those tools is often beyond the reach of many community banks. So they either end up with insufficient IT capabilities or systems that become too complex and unmanageable.

Cloud solutions can be the answer.

Working with the right cloud vendor can allow your institution to enhance your capabilities, improve your security and tighten up your regulatory compliance while minimizing the complexity and workload on your in-house personnel.

Cloud benefits

Consider some of the benefits that are possible through the cloud. For many banks, improving system availability is a key goal, but that requires system redundancy. Building that redundancy in house is expensive. Because a cloud vendor can leverage its investment in all the back-end systems and software necessary to provide extremely high availability across multiple customers and multiple sites, they can help you meet this goal affordably.

Cybersecurity is another key concern for community banks. From encryption at rest to advanced SEIM (security and event incident management) to reviewed and tested security protocols, some cloud providers are able to offer the advanced security solutions many community banks want but do not adopt due to cost or complexity.

Disaster recovery is another key concern for community banks. A cloud vendor is, by its very nature, off site. Cloud vendors generally house operations in data centers designed to withstand almost any natural disaster and also have many layers of redundancy. Absent other benefits, just by signing up with a cloud provider, many community banks would vastly improve their disaster-recovery capabilities.

In some ways, cloud solutions are similar to the service bureau models that many community banks have used. But service bureau solutions had limitations—they locked you into using a specific software solution and generally allowed minimal customization. Cloud solutions are different. You have your pick of a variety of software packages and are able to develop a customized solution tailored to your needs. 

You should also be aware that there are different types of clouds, and that they offer varying degrees of security. When investigating vendors, determine whether you will be working in a private, enterprise or public cloud environment. In some cases, a vendor may offer multicloud options, where varying functionalities are situated in different clouds to align with business and security requirements.

Cloud risks

Of course, there are risks with every option. Cloud solutions are no exception. Following are some key concerns to consider when investigating cloud vendors:

  • Vendor due diligence. How long has the vendor been in business? How much experience do they have in the banking industry? Are they financially stable? What about their cybersecurity—are their security claims backed up by a reputable third-party review? The right answers to these questions should be a first step in vendor consideration.
  • What about your data? You’ll want to make sure you understand all terms regarding access to and ownership of your data. You don’t want to end up having your data held hostage by your vendor.
  • Service level agreements. Make sure your contract documents include all vital performance parameters, including up-time.
  • Can they work beyond the cloud? Does the vendor offer only cloud services, or can they also provide other services, such as consulting to help align your process, personnel and technology needs; training; or other related service options?

Cloud solutions offer community banks an efficient way to keep their technology abreast of their needs without straining either their budgets or their personnel. But picking the right solution is key. Understanding the benefits and risks can help you enhance your IT capabilities affordably and effectively.

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