If you’ve only used the cloud to share photos with your family, it would be easy to overlook its importance in the tech world. You’d have no idea it’s an innovative storage data strategy that revolutionizes the way people and companies can send, receive, and store financial information.
Big or small, data is an important facet of the financial industry as it mobilizes services and products at a rapid pace. The cloud is helping it do just that, as FinTech companies take advantage of its relatively affordable, risk-free IT infrastructure to provide cheaper, more convenient access to online services.
What’s the alternative?
Before the cloud, every financial institution relied on siloed IT infrastructures. This data architecture created a closed system that made it difficult or impossible to integrate with other systems. It tied a department’s data to one place, making it inaccessible to other departments even if they were within the same organization.
Companies that still rely on the silo method put a strain on the IT department. If these disparate systems need updating, or if departments need to share data, it takes IT employees a long time to manually update or merge them together. They also rely on a lot of in-house equipment — data centers or server farms large enough to hold data on site.
How does the cloud differ?
Old, siloed IT infrastructure ties data to a physical place on the company’s premises. It’s inflexible and expensive to run, reducing how quickly and easily financial institutions can update information. The cloud, on the other hand, offers an easier, more adaptable system to share and update information. It relies on off-site servers connected by the Internet. This network makes it faster and simple to make real-time changes to data. Any device connected to the Internet can be updated remotely.
It’s also a lot cheaper to operate. Instead of the large data centers that require investments in both equipment and space, the cloud outsources its storage to off-site data farms maintained by a third party. It takes less money upfront to establish, and it doesn’t need physical space to operate.
Why is this important for your finances?
Previous to the cloud, legacy IT systems were the only ways financial companies could store data. Since only the biggest corporations could afford these systems, this infrastructure priced out any smaller enterprise hoping to offer an alternative.
The cloud, in offering cheaper ways to store data, has given rise to a new kind of financial company. Smaller, online-based FinTech companies now have the opportunity to challenge the traditional bank with help from the cloud. As a consumer, you only stand to benefit as your choice of financial services increase.
What are your options?
The number of disruptive FinTech companies on the market is growing every year. What once was a small niche in the financial industry is now valued at $876 billion, with 27 FinTechs certified with unicorn status. Number two on Business Insider’s list of FinTech unicorns, Stripe is the highest valued English-language FinTech service worth $9.2 billion. It’s used by Kickstarter, Lyft, and The Guardian as an online payment processing method.
Unicorn status is so named because of how rare it is, so few FinTech alternatives have it. That doesn’t change the fact that these alternatives provide branch-less, online services to millions of Americans every day. An online lender like MoneyKey doesn’t have a branch, but its website and app can process customers’ online loan applications 24/7. Once approved, their loans usually only take one business day to arrive. A mobile bank like Chime doesn’t have a single branch either, yet it also performs daily banking tasks round the clock. Its customers can use instant peer-to-peer money transfers and check depositing.
Since they rely on the cloud, they can promise this rapid response to customer’s needs. They’ve eliminated many of the barriers that would typically slow down a traditional bank’s methods of facilitating money transfers or approving online payday loans. They’ve also eliminated the physical barriers stopping customers from reaching out; all they need is the Internet and a phone to manage their finances.
The siloed infrastructure’s days are numbered. These outdated legacy systems simply can’t offer the fast, flexible services consumers expect in this connected world, meaning more customers will be opting out of their services for FinTech alternatives. Traditional banks are making the transition slowly, but the cloud favors the FinTech startup. With no previous IT infrastructure to tweak, they can adopt the cloud faster than other organizations and provide mobile financial services to digital customers.