Busting 5 myths associated with cash management in the cloud

Times are changing, and many banks are branching out to deliver and package up new and powerful value-added services for cash & liquidity management. While these products are designed to encourage commercial customer acquisition and retention, there are bottom-line benefits for the financial institution as well.

EY indicates that cash management solutions produce returns on equity of over twenty percent when compared to lending products and can reach as high as eighty percent.ⁱ  In addition, banks responding to a survey conducted by McKinsey expect cash management solutions to be one of their biggest growth engines over the next three years.ⁱⁱ 

However, you won’t realize the best returns on your investment unless you’re taking advantage of the cloud.  According to McKinsey, cloud-based cash management services offer more powerful functionality delivered in an efficient cost-effective way.

Unfortunately, banks aren’t always buying into the enhanced operational performance. Instead, they’re buying into myths surrounding the cloud.

Cash management in the cloud has the potential to reduce your overall costs and boost outcomes, but only if you learn the truth about the 5 myths listed below.

Myth #1: Cloud-based services are costlier than in-house offerings

Products hosted in-house may seem like they provide you with complete control, thereby allowing you to better manage costs. The truth is, you’ll likely spend more in maintenance and upkeep with on-premise software than you will by moving cash management solutions to the cloud.

Cloud migrations also shave costs by simplifying your go-to-market process. Since most cloud-based services are offered through a pay-as-you-go pricing model, you’ll be reducing your initial capital outlay and saving on monthly maintenance.

Myth #2: A single cloud-based cash management solution won’t fit the needs of all my customers

It’s true that the cash management needs of a small business may not be the same as a large corporation, but if you’re thinking you’ll need multiple solutions to scale, you’re not realizing the flexibility of the cloud.

Cloud-based solutions are housed on platforms and connected to financial institutions via APIs. APIs are a connection layer that allow the cash management products on the platform to directly interface with banking data and systems and with each other.

This type of connection provides unprecedented flexibility, supporting a modular approach to solution design. As a financial institution, you can build a complete cash management solution, offering the modules necessary to meet client needs.

It’s the opportunity to scale into new markets while also tailoring offerings to the individual needs of each business client.  

Best of all, capabilities are delivered seamlessly to your customers from a single simple interface.

Myth #3: My customer data will be siloed in a cloud cash management solution

A recent survey indicates that businesses are looking at more than your cash management solution when selecting a banking partner. In fact, seventy-five percent view the strength of your overall capabilities as a primary factor.ⁱⁱⁱ 

Businesses want to streamline financial management, and that includes access to accounts, payment services and other processes related to how they handle and manage cash. As a result, the ability to integrate cash management with other processes, such as lending and trade, becomes a competitive differentiator. Cloud-based cash management services can easily integrate with your other commercial banking services, thanks to APIs.

APIs make it possible to connect a multitude of banking operations, opening a seamless data-sharing environment that streamlines business financial management.

Myth #4: Cloud-based applications are slow, and my customers won’t like them

Since customers must connect to a cash management solution in the cloud, you might be worried that they’ll experience greater latency than they do with your own on-premise solutions. According to McKinsey, this simply isn’t true as there is little difference between the inner workings of a cloud service provider and the bank’s own data center.^iv 

In fact, their research shows that cloud latency is usually created by banks as they employ extra measures, such as backhauling data, to enhance security. Their advice is to trust the cloud, leading us to the last cloud-related myth that needs busting.^v 

Myth #5: The cloud isn’t secure

Your customer data is one of your most valued and privileged assets, so it’s natural to have concerns when sharing it outside the walls of your institution. However, there are a few attributes of the cloud that will likely make services more secure than your own on-premise offerings.

For one thing, cloud servers are stored in warehouses with highly restricted access. That means that very few employees ever see the data held within those files, and even if they were able to access it, they’d need an encryption code to make sense of it.

While these physical safety measures are ideal for preventing theft of data from inside the organization, cloud providers also employ advanced measures to deter outside access, such as robust firewalls. In addition, cloud-based services receive timely security updates, servers are consistently monitored for suspicious activity, and providers implement new best practices as they emerge to ensure safety of any information shared with or stored in the cloud.

Now that we’ve busted the 5 most common myths about cloud-based services, isn’t it time you considered moving your cash management solution to the cloud?

Contact us to find out how we can help you capture the benefits of the cloud.

 ^{_{i Andrew Gilder and Li-May Chew. “How Banks Should Respond to Changing Cash Management Dynamics.” EY, Dec. 26, 2019. Web.  ii Sandeep Sharma et al. “Reimagining Transaction Banking with B2B APIs.” McKinsey & Company, Oct. 12, 2020. Web.  iii “Fusion Cash Management.” Finastra. Finastra Solution Brochure, retrieved from https://www.finastra.com/sites/default/files/2020-06/brochure_fusion-cash-management-solution_0.pdf.   iv Mark Gu, et al. “Debunking Seven Common Myths about Cloud.” McKinsey & Company. McKinsey Digital, Oct. 5, 2020. Web.   v Mark Gu, et al. “Debunking Seven Common Myths about Cloud.” McKinsey & Company. McKinsey Digital, Oct. 5, 2020. Web.}}