How Cloud technology is powering Banking APIs


Alessandro Saini

Head of Marketing

Reading Time: 5 minutes

Technology is shaping the global economy like never before. Banks and financial institutions have been sluggish in their adaptation to the digital landscape.

The cloud has been leveraged to power Banking APIs today due to its scalability and elasticity. Microservices deployed on scalable cloud infrastructure support movement from monolithic & proprietary systems to scalable technology architectures for accelerated time to market.

The cloud has evolved over the years to what is now called the Distributed Cloud or Supercloud, with abilities to view and manage centrally through a common control plane, applications running across multiple, independent cloud infrastructures and vendors. 

Distributed cloud is becoming synonymous with edge computing, allowing the running of application workloads as physically close as possible to where data is created or consumed.   

A typical organization today deploys and tests across 3.4 public cloud environments; the ability to manage orchestrations and states across a distributed cloud estate has become critical. 

How do Cloud-native technologies help Banks?

Cloud-native technology improves banks’ digital performance by facilitating the effective collection and storage of data. Its primary competencies are speed and adaptability, accelerating application development and automation.  

Cloud technologies can autonomously update and maintain all infrastructure components by offering simultaneous real-time data access and tracking for banks and their clients globally. The high performance comes at a much cheaper cost than conventional data systems, with even simpler system management that even connects legacy systems. Thus, the benefits of cloud systems for the banking industry are evident and broadly applicable. 

According to a BCG report published in 2021, up to 60% of consumer-facing applications, 40% of data warehouse and analytics workloads, and more than 30% of core business applications will be operating on public clouds managed by businesses such as Amazon, Microsoft, and Google by 2025.

Cloud computing offers an on-demand infrastructure orchestration solution that gives developers control, visibility, and self-service as required under a standard platform for simplicity of maintenance, thereby minimizing the risk of unplanned downtime. It provides the structure for more stringent security controls to prevent data breaches and assure regulatory compliance.  

Banks are partnering with external Fintech partners across new financial models to personalize customer experiences using APIs. However, banking APIs on a cloud-native infrastructure can be leveraged by banks to become Fintech-style API consumers that offer these hyper-personalized products and services themselves, thus becoming direct competitors to their Fintech counterparts. 

To learn more about developing an API strategy to become an API consumer, check out our whitepaper – How to Develop an API Strategy for Open Banking 

Banking APIs and the Cloud

Banking APIs enable the integration and distribution of banking products to consumers, businesses, and partners. Cloud technology has revolutionized how banks construct, create, and manage APIs, allowing them to escape the constraints of traditional monolithic and proprietary systems. 

Earlier, API technology worked on conventional architectures constrained by the infrastructure’s restrictions. This strategy necessitated the upfront definition of hosting arrangements statically, which led to the centralization of integration problems. It eventually hindered the bank’s capacity to establish and modify APIs as required rapidly. 

With the advent and popularity of microservices, the technology necessary to enable them increased the demand for API development and administration. With cloud-native processes and tools, APIs and cloud technologies can minimize technology complexity and generate new value for consumers and partners. Banks can transcend the limitations of old API techniques and achieve new levels of agility and efficiency.

Securing API attacks against banks using Cloud

With the increasing sophistication of cyber threats, traditional techniques for security have proven ineffective against modern criminals. APIs deal with data in motion, and it has become a common avenue for hackers to access and change bank data. Cloud platforms can facilitate the adoption of a zero-trust architecture with a service mesh that provides API protection based on the assumption that any communication from any source is, by default, untrusted.

By incorporating a Kubernetes-native approach to API management, banks can leverage the cloud platform’s core capabilities to create the best possible API security posture for its data in motion.

Cloud technology for API design

APIs aim to make data interchange simple, secure, and trustworthy, and a good API design can guarantee that the bank does this task effectively. Cloud platforms can enforce API best practices and API standards by applying and enforcing rules during the deployment pipeline and at a standardized policy enforcement point. This enforcement facilitates the simplification and uniformity of API definitions.

By imposing proper API design standards, cloud technology can make your architecture more agile regarding API granularity. Banks can use containers to adopt a microservice-based architecture to break APIs into right-sized pieces that can independently evolve while maintaining the security and reliability essential for communication inside and outside the bank.

Cloud computing advantage for API development

The capacity to update APIs can give banks an exceptional competitive advantage. Cloud platforms enable agile teams to evolve APIs without needing infrastructure or supporting resources. It allows teams to spend more time on API development and facilitates remote developers’ identification and utilization of APIs. 

With a Kubernetes-native approach, developers may expedite the release of new features to users and streamline software delivery. In conjunction with deployment pipelines, the cloud platform provides developers with additional API creation, testing services, and technology to support full-stack development.

Using cloud computing to enhance API operations

API consumers have service-level expectations for the APIs the bank provides. APIs depend on other systems and components to work efficiently and fulfill service-level requirements. Poor API performance and outages can harm a bank’s reputation and make it expensive to return to operation. 

The service mesh within the cloud platform exceeds conventional API monitoring techniques. They can detect slowdowns automatically and disable communication until the affected component recovers. Cloud platforms can increase the value of service meshes by automatically identifying sick instances and taking corrective action to restore their health. These cloud-based features not only improve accessibility but also minimize operational expenses.

Pipelines are also implemented into cloud systems to allow continuous delivery. When new API versions need to be released, this can alleviate the burden of onerous deployment methods. It also enables banks to utilize canary deployments so that traffic can be transferred gradually to the latest API version, reducing deployment risk.

The Supercloud

Multicloud has its own set of challenges spanning performance and security. Supercloud is a cloud architecture enabling application migration across different cloud providers. An essential part of cloud-native architecture is the explicit separation of data and control planes.

Financial institutions should seek distributed application construction platform providers whose Peer Servers running as microservices can run in containers while connecting via asynchronous means, including publish/subscribe, leveraging dynamic routing across multi-cloud and hybrid IT networks.

Engineers can then map microservice interactions using sidecar patterns to support asynchronous messaging among the peers. 

The Peer Servers should serve as a cloud-native data plane, responsible for the proper routing and delivery of messages, automatically applying data transformations as necessary during microservices interactions – even during multi-step processes. As a result, microservices interactions will be natively data-aware, allowing organizations to implement complex, asynchronous applications on the application construction platform.

Normalizing security policies and interfaces (APIs) across cloud and edge providers still exist, and leveraging APIs can help secure the Cloud and make it possible to realize the aspirational capabilities of the Cloud.

Wrapping up

Cloud technology and banking APIs have democratized the types of businesses entering financial services and influenced how they offer services. Apple, for example, now offers savings accounts.

Banks stand to gain by leveraging Cloud-native technologies for API development and maintenance. Early adopters will be the winners.

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