The Impact of Cloud Computing in FinTech
With billions in venture capital funding, FinTech – financial technology, has proven that it is more than just another buzzword. Over the past few years, many companies in this innovative industry have not only raked in big bucks, but they have also created systems that have eased the various processes of businesses across the world. FinTech companies thrive based on the automation of processes. As such, they are predominantly online-based and require effective transaction processes in real-time, robust user experience, and more. To this end, they are required to be reliable and efficient. Their ability to have immediate access to large amounts of data – while being able to store it safely for extended periods – is now a prerequisite for these companies to stay in business. More so, their customers demand that the services provided are affordable and easy-to-use.
While these companies are growing fast owing to the fast adoption of digital technology, many of them are biting more than they can chew. One of the most critical needs of these companies as they deal with high amounts of data is ‘storage.’ For FinTech companies to effectively carry out the above processes while also keeping costs low, it must have proper storage infrastructure. Broadly, there are two methods by which these companies can handle these needs. They include the traditional system of storing ‘on-premise’ that is on local servers, as well as the innovative and relatively new method of cloud infrastructure.
On-premise requires the purchase, installation, and management of local hardware or servers, and this cost is essentially the most expensive line item for most FinTech businesses. On the other hand, Cloud computing is a practice of using a remote server for storing, managing, and processing data over the internet instead as opposed to a local server.
Predominantly, FinTech companies use on-premise infrastructure, and this generally skyrockets their initial cost. Thanks to cloud computing, this cost is avoidable. Since the goal of the FinTech companies is to have the relevant IT infrastructure to support their innovative ideas while also keeping costs low, there is a need to move towards the ease, affordability, security, and sustainability that cloud computing offers. The modus operandi of many FinTech companies carrying on the cost of large and expensive infrastructures even before their business starts and poses an array of challenges.
- Avoidable Initial Cost
One of the first few things FinTech companies do as soon as they commence operations is to purchase on-premise facilities. While servers are a necessity for their line of work, on-premise servers are incredibly costly compared to cloud infrastructure solutions. With these servers covering a depreciation period of typically five years, the company ties down financial resources to unnecessary infrastructure. The cost of the infrastructure can quickly and easily drown the revenue made by the company – even when it doesn’t require all these resources. More so, the costs associated with it like power, security, cooling, etc. take up a considerable chunk of the company’s funds. With cloud computing infrastructure, the cost can be paid piecemeal based on the usage requirement of the companies.
- Wrong Application for Right Market
The world might have become a global village, but not everything fits perfectly across geographical locations and systems. Since many of these infrastructures are imported, a number of these FinTech companies end up buying applications from a different market that does not serve the impending market adequately or vice versa. This ultimately leads to the need to incur additional expenses to modify and adapt these off-the-shelf applications.
Another challenge of using on-premise is that it is not very flexible. First, the cost requirement, especially where modification is required, can be high – providing minimal guarantees. There is also very little or no room for growth or agility in a changing environment. Where the business needs to scale back its operations, it cannot scale down the already purchased on-premise infrastructure facility until it’s written off. Consequently, when it also needs to expand its infrastructure requirements by even just a little, it will need to make another massive purchase for another long-term asset.
The Way Forward
Towards providing a lasting solution, FinTech companies should completely opt for full cloud systems and a shared platform as opposed to individuals wanting to own server infrastructure. This does so many things for them.
In terms of cost, its high purchase cost, including the additional costs that come with owning an on-premise facility, is significantly lowered. Even the cost of expert management is outsourced, leaving the business to focus on its core objectives. In terms of the staff required to man the infrastructure, with cloud infrastructure, the FinTech company now can stay lean from a tech headcount perspective. Even better is that it can now afford to have more skilled personnel in its direct line of business.
Also, as opposed to spending valuable time and resources, it can focus on other aspects like on differentiating its services from competitors through innovative personalization. With significantly lower costs, it can also provide efficient and affordable services to the end-user, making it stay very competitive.
It also allows for speed-to-market and agility as infrastructure can now be personalized, expanded, or scaled back very quickly and without any unnecessary lead time. There is also the added advantage of data security, especially in cases of disasters. Thanks to the internet, there is an increased level of security/ safety.
Reports by IDC suggest that the collective sum of the world’s data is to have a compounded annual growth rate of 61%. In situations where data required by these FinTech companies become exponentially high, there must be an existing capacity to meet all user demand within the industry.
Methods of Making A Seamless Switch
There might be FinTech companies willing to make the switch to the cloud but are, however, held back by the fear of the process of changing from on-premise infrastructure to the cloud. For a seamless switch, there are two natural methods. The first is known as a hybrid cloud approach, and the second is the multi-cloud approach.
Hybrid: With the hybrid method, companies can incorporate specific cloud computing systems while keeping part of the data infrastructure on-premise. It’s ‘one leg in; one leg out’ type of switch and provides the opportunity to grow into a fully cloud-based system gradually.
Multi-cloud Approach: This refers to a situation where a business chooses to use a variety of applications across multiple public cloud providers. While it’s on the cloud, it solves the challenge related to the fear of losing control of your data to a single cloud computing vendor.
Cloud computing is ultimately the future of data management and storage infrastructure across the world. FinTech companies indeed should be the first to attain full adoption.