THE more-recent technology doesn't always come with a higher price tag. In the case of cloud computing, companies are finding that the latest technology comes with operational efficiencies over traditional in-house data centres.

Singapore’s DBS Bank recently switched out one of its data centres and placed it on the cloud. “With the new cloud data centre, we are able to significantly increase our energy efficiency as well as drastically reduce our carbon footprint,” says David Gledhill, DBS group chief information officer. The bank said that the change will save it 75% compared to its data centre costs.

Cloud computing, put simply, is an information technology which stores data on an external server that is accessed through the internet. Costs can be saved as companies do not have to purchase and install IT systems themselves. It also eliminates the cost of hiring IT professionals and other support, licensing and maintenance costs. Further, data centre energy costs can be high, as they can consume 30 to 80 times more energy per square metre than traditional office space, according to Gartner Research.

Financial institutions, such as US-based Simple, UK-based Starling Bank and Brazilian-based Nu Bank, have leveraged on cost-effective cloud technology to compete with incumbent banks. Capital One and J.P. Morgan chase are also currently experimenting with cloud technology to drive efficiency within their respective organizations.

Aside from cutting data centre costs, cloud computing can be used to facilitate enhanced financial services in areas such as trade finance. Due to extensive document and information exchange between multiple entities, cloud computing can ensure a smooth flow of information between trading parties. Supply chain interface Taulia, for example, uses a cloud system to better manage invoice, payment and dynamic discounting management.

However, institutions need to be aware of the risks which could arise from cloud computing. RedLock, a cloud security consulting company, found recently that hackers were using the Amazon Web Services cloud network to mine bitcoins, adversely affecting corporations on the cloud, such as insurer Aviva and digital security company Gemalto.

Despite the risks, it is clear that we are moving towards a more cloud-based world. Outside of Amazon Web Services and Microsoft Cloud, China has started to make inroads with cloud computing. Alibaba’s recent singles day festival, which saw US$25 billion worth of sales on its e-commerce platform, was powered by Alibaba Group subsidiary Alibaba Cloud. The cloud company has more than one million paying customers.