Analyzing Trends and Technologies in Modern Banking Systems

This report examines the transformative trends of digital banking and cloud technologies within the banking sector. It discusses digital banking's rise due to IT advancements and its implications on profit margins and growth rates, addressing issues like application quality, cyber-attack vulnerabilities, and service delivery speeds, with recommendations for quality assurance, security testing, and software testing. Similarly, it explores the benefits of cloud servers in terms of flexibility, scalability, and cost savings, while also addressing concerns about data security, regulatory compliance, and control, suggesting measures for data protection, legal compliance, and staff training. The report concludes that both technologies have the potential to revolutionize banking if implemented effectively, particularly in disaster recovery and customer engagement, but emphasizes the importance of resolving associated challenges, especially in the face of increasing cyber threats.

Running head: TRENDS AND TECHNOLOGIES IN BANKING
TRENDS AND TECHNOLOGIES IN BANKING
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1TRENDS AND TECHNOLOGIES IN BANKING
Table of Contents
Introduction........................................................................................................... 3
Discussion.............................................................................................................. 3
Introduction of Digital banking...........................................................................3
Issues................................................................................................................. 4
Recommendations............................................................................................. 5
Introduction to Cloud servers in Banking...........................................................6
Issues................................................................................................................. 7
Recommendations............................................................................................. 8
Conclusion............................................................................................................. 9
References........................................................................................................... 10

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Introduction
In the following report, two latest technology and trends in the banking
environment have been highlighted. The first technology has been taken as
digital banking. The second technology has been taken as cloud environment.
The implication of these technologies in the banking environment has
been analysed and discussed. The issues that are related with these
technologies in the banking environment has been discussed and possible
recommendations for each of the issues has been highlighted. Cloud computing
has been a boon for the banks in the recent years as it has helped the financial
institutions to increase their cost savings and focus on their business operations
effectively. Digital banking has gained tractions in the recent years due to the
rapid development of IT technologies and internet. Both of these technologies
have tremendous capabilities to assist the banking environment ton gain a
competitive edge.
In the report, both of these technologies has been evaluated with their
benefits as well as issues and the challenges they face in the current situation
with respective to the banking environment.
Discussion
Introduction of Digital banking
The main pillar of any financial system is the payment system. In 2016,
the number of non-cash medium of transaction ranged over half a trillion dollars
from all over the world. With digital banking, banking institutions can move their
banking services over the internet. Several web based services and high
automation levels are necessary to incorporate this service in the existing
banking transaction methods. Digital banking helps individuals to access their
banking data through ATM services, mobile devices and personal computers.
This latest trend incorporates a front end which customers can see, a back
end which can be accessed by the bankers and a middle ware which connects
this two nodes. Digital banking can perform almost everything a traditional bank
can do and has the same functions just like a normal bank such as online
services, branch offices and bank cards (Raskin and Yermack 2016). With the rise
in digital innovations and e commerce solutions, the adoption of digital banking

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has skyrocketed among the consumers. The increase in smartphones during late
2008 also contributed a lot in the proliferation of the technology.
The implication of this technology in the banking environment showed that
the banks which extensively incorporated digital banking had lower profit
margins than the branching banks due to the trouble in deploying deposit
funding, low revenues and higher labour costs. In contrast to this, banks which
adopted digital banking had a much higher growth rate than traditional banks
(Broeders and Khanna 2015). Also, banks which utilized digital banking are more
financially competitive as they have can access economies in the deeper scale
than normal traditional banks. It can be stated that as the internet accessibility
increases, the financial performance of digital banking will improve as well.
Issues
There are several issues with digital banking which needs to be addressed.
The first on is attaining a perfect application. A proper digital banking
smartphone application gives immense reassurance and power to the user who
is accessing it. Smartphones are getting smarter and personal day by day with
lock screens comprising of biometric authentication nowadays. This factor needs
to be taken into account by developers who needs to develop and upgrade the
applications for retaining customers from time to time. With the digital banking
applications allowing users the comfort of accessing the financial data from
anywhere and anytime, the developers should work hard to provide the
customers with a seamless app experience. In spite of this, several digital
banking apps are filled with bugs and often face performance issues which
makes navigation extremely tedious, resulting in the crashing of the application
(Dapp and Slomka 2015). This immediately reflects the company’s inability to
provide customers with a fluid app experience.
The second issue is the threat from cyber-attacks. As the applications deal
with financial transactions, they are vulnerable to frequent attacks from cyber
criminals. Even with protective infrastructure, there is always the slight chance
that the data that is being handled by the application can get compromised.
The third issue is the delivery speed of the service. To provide customers
with seamless transactions, organizations often invest more on delivery speeds

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rather than the quality (Bose, Luo and Liu 2013). This can result in several bugs
in the apps which is normally ignored by the institutions.
Recommendations
To address the first issue, proper professionals of quality assurance needs
to be contacted to assure, assess and inspect the quality of the respective digital
banking software. The professionals need to be involved in the SDLC stage of the
application at an early stage so that they can develop an application of premium
quality (Schuchmann and Seufert 2015). With rigorous testing, they can find the
issues and provide proper patches to fix the bugs.
To address the second issue, proper security testing needs to be
conducted to check all the vulnerabilities and issues that can be utilized by the
attackers. The internal architecture analysis and the banking system needs to be
properly analysed with the security testing.
To address the third issue, proper software testing needs to be conducted before
the application hits the market. By properly analysing the issues, banks using the
digital banking platform can identify the issues and terminate it at the
requirement gathering stage.
Introduction to Cloud servers in Banking
Unlike the fixed legacy systems and IT infrastructures that are used
traditionally by banks, cloud servers provide both flexibility and agility to deploy
the necessary infrastructure for IT. As banks are evolving to properly manage the
influx of data, the data centres have to evolve as well to handle the constant
information flow across various environments. The cloud environment allows the
banks grow organically in several geographical locations organically without the
need of maintaining a physical presence in the region (Hashizume et al. 2013)
The cloud environment enables the banks to create new services and markets
with the prospective users to gain competitive advantage. The banks can create
new customer centric business models with the help of cloud environments to
increase profitability and growth.
The cloud servers can enable banks in the future to check analytics of
data and process credit card requests. Technically, the cloud servers allows the
bank to configure, integrate and assemble technology for meeting the goals of

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the bank institutions. In the area of analytics, it helps to integrate customer data
to gain real time insights across various platforms of banking. In the area of
business services, it can incorporate other third party services for supporting
customer’s grievances by extending the financial ecosystem. Cloud server are
also used to centralize the desktop management through a private cloud system
in the bank for better flexibility and control (Carlin and Curran 2013). It also
allows the development team to separate the banking environment for testing
and development by creating a virtual environment. The cloud environment can
be utilized by banks to back up important business data in case a disaster
strikes.
Endpoint management is also enabled with cloud servers in banks for
better corporate governance and policies. Also, this new technology allows the
banks to maintain a storage solution for real time analytics process and trading
data. Sometimes, the banks can transfer their payment functions to the cloud
environment due to agility, efficiency and cost savings (Jain and Paul 2013). In
the future, this technology will allow banks to address customer engagement and
risk management through better analytics of big data and mobile technologies.
Issues
There are several issues with incorporating cloud services with the
banking environment. The first issue is data security. Keeping the business as
well as customer data is important for every financial institutions. As the
banking data is personal and sensitive, they are susceptible to extreme
vulnerabilities (Garg, Versteeg and Buyya 2013). For each compromised data,
the banks have to handle the extra overhead costs.
The second issue is compliance and regulation. Adopting a cloud
environment in a bank requires jurisdictions and business partners to comply
with certain standards. The laws related to data protection dictates how the
banks and other financial institutions will store and manage the particular data.
The executives of the banks are particularly concerned that keeping the data in
cloud servers will result in negative publicity and hefty fines.
The third issue is related to control. With the adoption of cloud servers,
the control of certain business data and applications can fall into the wrong
hands. The person handling the data needs to be well trained as most of the time

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the data is client based and extremely sensitive (Fernando, Loke and Rahayu
2013). Handling critical updates of the cloud system infrastructure to the service
provider is very dangerous as one wrong move from the service provider can
bring down the entire structural integrity of the bank. This is one reason why
some banks are still reluctant to move their business operations to cloud servers.
Recommendations
To address the first issue, the processing operations and the data need to
be checked properly before passing onto the cloud servers by the banks. The
banks need to differentiate data according to personal data, strategic data,
business data and customer sensitive data. Certain types of data need to be
monitored and regulated properly by the banks to prevent the data from being
accessed by hackers if the institution is susceptible to cyber-attacks. Proper risk
analysis need ti be carried out to assess the required security measures in the
banks.
To address the second issue, the banks need to state their own legal and
technical security requirements properly. The banks need to properly
communicate with the jurisdiction bodies for proper implementation of the new
technology (Arora, Parashar and Transforming 2013). The stakeholders and other
business partners need to be made aware of the new changes that are being
implemented in the banks.
To address the third issue, the authority needs to make sure that the data
processing is properly monitored and governed by them. They need to
understand that the new technology is required to assist them in their business
operations not depend on the technology entirely for business operations. Staffs
who handle personal and sensitive data needs to be properly trained about the
risks that are associated with the data that they are handling (Rittinghouse and
Ransome 2016). The service providers should also be aware of the risks with the
data that they are handling. The legal qualification of the service provider needs
to be assessed properly by the bank authorities. The level of protection provided
by the service provider to the banks needs to be checked as well.
Conclusion
To conclude the report, it can be said that both of these technologies has
the capability to change the banking environment if the recommendations are

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implemented effectively. Cloud servers are necessary in the banking scenario
due to their disaster recovery solutions mainly which is not possible with
mainstream hardware solutions. Digital banking is also necessary for banking
environment to attract more customers in the environment due to the ease of
functionality and accessibility. Both of these technologies has arisen with the
advancement in IT revolution and will improve the banking environment in the
long run, if the challenges and issues are resolved properly.
In the coming years, these trends and technologies will have a wide
impact in other financial sectors too besides the banking environment. Currently,
with the rise in cyber-attacks, both these technologies are unable to reach their
maximum potential. With the advancement in cyber security and proper
awareness of the attacks, these technologies will change the total landscape of
the banking environment.

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References
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Bose, R., Luo, X.R. and Liu, Y., 2013. The roles of security and trust: comparing
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survey. Future generation computer systems, 29(1), pp.84-106.
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Hashizume, K., Rosado, D.G., Fernández-Medina, E. and Fernandez, E.B., 2013.
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