Have you ever had a core system vendor rep proudly proclaim, “Yeah, our system is in the cloud,” only to leave you wondering what that really means? Well, let me break it down for you. When it comes to cloud-based core banking solutions, there are broadly two types: cloud-hosted and cloud-native.
A cloud-hosted core banking solution refers to a system where the core banking software is running on a third-party cloud infrastructure, but the software itself is not built specifically for the cloud. It’s essentially a traditional on-premises system that has been lifted and shifted to the cloud.
In contrast, a cloud-native core banking solution is a system where the core banking software is specifically designed and engineered to run on cloud infrastructure, leveraging its scalability, flexibility, and other cloud-native capabilities.
So, what’s the big deal? Well, there are pros and cons to each approach.
Cloud-Hosted Pros and Cons:
- Pros: Generally lower upfront costs, lower risk as the software is already built and tested.
- Cons: Limited scalability and flexibility, potential vendor lock-in for infrastructure and support.
Cloud-Native Pros and Cons:
- Pros: Built for scalability, flexibility, and cloud-native capabilities like auto-scaling and containerization.
- Cons: Potentially higher upfront costs, new software that may have more risks and uncertainties.
The choice between cloud-hosted and cloud-native should be driven by your bank’s specific needs, priorities, and risk appetite. A cloud-hosted solution may be suitable if you have more immediate needs and a tighter budget, while a cloud-native solution may be the way to go if you prioritize scalability, flexibility, and future-proofing your technology stack.
Let me try to summarize this in a table format for you:
The key takeaway is this: the next time a core system vendor rep casually throws out “our system is in the cloud,” don’t just take their word for it. Dig deeper and ask whether it’s a cloud-hosted or cloud-native solution. Weigh the pros and cons carefully, and make an informed decision that aligns with your bank’s strategic goals and long-term vision.
In the ever-evolving world of banking technology, staying informed and making the right architectural choices can mean the difference between a future-proof, agile core banking platform and a rigid, inflexible system that holds your bank back.
Found this article interesting? Check out these three related reads for more.
- Core banking hosting option – In-house vs. Cloud hosting
- Cloud computing in core banking security – The future of banking technology
- Benefits of cloud-native core banking solutions over cloud-hosted
#CoreBankingTransformation #CloudBanking
