How cloud works

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How cloud works


This content is contributed or sourced from third parties but has been subject to Finextra editorial review.

Kicking off the Finextra Financial Cloud Series, we will be stripping back the subject of cloud and answering commonly asked questions.

How does the cloud actually work?

Vox’s Re/code addressed this question as part of its Too Embarrassed to Ask series, highlighting that the technology industry likes to create and use buzzwords that can be “nebulous or arbitrary terms [that] don’t make it clear what they actually mean to consumers.” Defining the term, the article states that “when tech companies say your data is in the cloud, or that you can work in the cloud, it has nothing to do with white fluffy things in the sky. Your data isn’t actually in heaven or in the wind. It has a terrestrial home. It’s stored somewhere — lots of somewheres — and the network of servers find what you need and deliver it.”

The article continued: “The cloud refers to software and services that run on the Internet, instead of locally on your computer. Most cloud services can be accessed through a Web browser like Firefox or Google Chrome, and some companies offer dedicated mobile apps.”

How does cloud computing work in simple terms?

In simple terms, the cloud allows individuals or organisation to access and store information on any device with an Internet connection. Therefore, cloud computing and cloud storage can be a cost-effective option for many. However, a bad connection can prevent access and problems can also arise if there are server outages. Further, as the information remains online, the risk of data infiltration increases, which can result in wider issues such as financial crime.

However, as The New York Times explores, in the “same way that your money is probably safer mixed up with other people’s money in a bank vault than it is sitting alone in your dresser drawer, your data may actually be safer in the cloud: It’s got more protection from bad guys.”

Where is data stored in cloud?

Instead of being stored on your personal device’s hard drive, cloud-based data is stored elsewhere and on cloud computing systems, servers, and storage devices, that are connected with networking equipment around the world. Companies can also have their own clouds, called private clouds, that employees and customers access, usually over the internet and on their own private networks. With cloud, workloads are shared, and computers can run closer to full capacity, with several programmes operating at the same time. Further, if one machine fails, the process moves to another part of the system with little downtime.

How is cloud changing financial services?

A Finextra Research and Volante Technologies survey conducted in early 2021, based on a sample of 150 banks and payment service providers, found that cloud delivery models now dominate the payments space, with a full payments-as-a-service delivery model taking a growing slice, particularly for regional sized institutions.

The report, ‘Payments modernisation: The cloud imperative’ revealed that: “A decade ago a significant majority of payments systems would have been hosted in financial institutions’ own data centres, whether it was their own in-house software or that of a third-party vendor. But as regulatory and security concerns have been addressed by the industry with regard to cloud adoption, the benefits of reliability, scalability and cost have become clear. Now, more than two-thirds of our survey respondents use some kind of cloud model for their payments systems.”

Further to this, “Private cloud, where infrastructure is owned by cloud partners but compute and storage resources are dedicated and client data is kept strictly partitioned, is the dominant model. But hybrid models, which blend private and public cloud components to ensure the best balance of compliance, performance, and technical and business agility, are also common. An emerging category is the ‘payments-as-a-service’ provider. Banks partner with these companies, who manage the cloud deployment of payment systems, connectivity to all required payments rails, and adherence to evolving messaging standards and regulation.”

Asking respondents to rate the sophistication of their current cloud strategy, a third of respondents said their approach to cloud delivery models was ad-hoc at best, while at the other end of the scale 24% to 30% said they had a detailed strategy covering cost, compliance, availability, and agility.

These findings will be covered in an upcoming Finextra Financial Cloud Series webinar, where the discussion will focus on formulating an actionable cloud strategy and providing those organisations with a non-existent cloud strategy, with a recipe for success.  

The Finextra Financial Cloud Series will present a step-by-step method for creating a cloud strategy, migrating to the cloud, and optimising cloud processes. In this content series, we will help plug knowledge gaps around the topics of:

  • Accelerating digital transformation 
  • Migrating on-premises compute farms to the cloud
  • Leveraging on-demand capacity and scalability
  • Adapting to keep pace with unprecedented events
  • Governing data and trust through stewardship

In May 2022, the Financial Cloud Series will focus on establishing cloud strategy and providing financial institutions that may have not embarked on their cloud journey with a recipe for success. In September 2022, the series will home in on cloud migration and in November 2022, cloud optimisation, leading to an in-person summit in February 2023. Contact to get involved. 


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This content is contributed or sourced from third parties but has been subject to Finextra editorial review.