The benefits of cloud-native software in financial services

Wednesday 5 October 2022 12:18 CET | Editor: Alin Popa | Interview

Michael Backes, Co-Founder and CTO at receeve explores the benefits of cloud-native software — especially when it comes to powering collections operations.


Security has always been a delicate topic when it comes to financial technology, especially within the banking industry and partnering with third-party software providers. What are the real risks behind cloud-based? How does cloud-native differ from on-premise alternatives? receeve experts share more.

Many financial services institutions partner with different software providers to boost their offerings and make their products a one-stop shop. What does this mean for all the parties involved?  Who are the institutions to stand more benefits based on these integrations?

A collaborative approach to service digitisation cuts both the time and cost of companies by allowing them to focus their critical resources on their core business. They also gain the added benefit of bringing in domain-specific expertise on a specific part of the business, increasing reliability and positive outcomes. 

Increasing service digitisation empowers businesses, as its more comprehensive data analysis and reporting improve access to customer insights. This facilitates detailed customer segmentation and offers opportunities to boost service levels through increased digital competence across multiple channels. 

In the case of collections operations, businesses can avoid upfront hardware investments and costly ongoing maintenance - with the option to scale up or down to meet current demands. This serves institutions that are looking to focus their resources on their core business. Similarly, companies seeking to arm their teams with a tech stack that enables scalability and independence from IT departments can ensure resource assignment is optimised.

Ultimately, consumers benefit from an improved service offering, allowing them to streamline the products they use and sustain patronage with the companies meeting their needs.  

Partnering with third-party providers also means taking some risks. Can you name a few?

The potential risks that arise from partnering with third-party companies can be many and varied: data exposures, failures in regulatory compliance, the adoption of inadequate security protocols, and more. If not taken into account, these issues can yield significant legal and reputational consequences. 

In some instances, risks are increased when vendors outsource elements of their own service to third-party providers. This is because security protocols, levels of transparency, and data protection policies can vary from business to business.

What are the security risks a financial industry services provider is exposed to when partnering with third-party providers? 

As financial services providers increase their third-party dependence, it becomes essential to identify critical services and ensure effective oversight of both system tolerances and security risks. And since the financial sector is inherently interconnected, with multiple entities across the value chain, businesses must consider central risks before onboarding new vendors, including the threat of data breaches, unauthorised access to internal information, and the disclosure of intellectual property.

What is the impact of these risks?

Since updates to legal and regulatory frameworks around data access and management are common, it can be a risk to simply assume your third-party vendor is safeguarding your operational and commercial compliance. This is evidenced by the fact that 64% of data breaches are linked to third-party operators - and the average data breach costs businesses over USD 7.5 million to remedy. 

To mitigate these potential risks, many companies employ cybersecurity risk management controls that include vetting third-party security practices and establishing data breach and incident report protocols. Unfortunately, these measures are often resource-intensive and costly.

An added consequence of third-party software use is the potential for outages and system failures - often from oversights at the implementation stage - leading to interrupted service for customers. As with data breaches, these gaps in usability can often be reputationally damaging and costly to resolve. Many vendors, therefore, employ a continuous deployment approach, automating the building, testing, and rollout stages of the software delivery process with each iteration. 

A large number of third-party software providers choose an alternative methodology, opting for longer production cycles that allow for increased testing prior to delivery, to reduce risk once the product is live. 

Though many of these risks are associated with third-party vendors, the development of proprietary software also carries with it many of the same potential pitfalls, requiring ongoing maintenance and robust security systems. To achieve this, large financial outlays are necessary, to ensure ongoing development, support, and maintenance.  

How can these be mitigated? How does cloud-native differ from on-premise alternatives?

As outlined, many businesses conduct rigorous testing and vetting processes to ensure new vendors meet their commercial and operational needs, from a delivery, support, and legal compliance standpoint. Still, third-party companies themselves can shore up security levels by separating sensitive data from primary system infrastructures - ideally with the use of a single-tenant cloud-based environment. 

On-premise applications are, as the name suggests, applications that are stored and run at a single premise - with data only being generated, stored, and accessed locally. A primary example would be an office with multiple computers running Microsoft Word. While the application may be installed or run across multiple computers, the files and documents created on a given machine will only be accessible by users logging into the same computer.

Cloud-native applications, on the other hand, maximise accessibility and eliminate reliance on a centralised storage source. They cut out the need for investment in expensive servers and allow for fast scaling, doing away with application developments, system management, and server-to-server integration.  

Crucially, cloud-based applications have the added benefit of offering simple, pain-free integrations, since they use APIs to quickly facilitate communication between multiple systems and programs. This ensures your tech stack operates as a single, coherent application, letting you connect multiple tools at the click of a button. 

What are the benefits of cloud-native software — especially when it comes to powering collections operations?

Cost-effectiveness, efficiency, and interoperability are key factors for businesses adopting new technologies. Additionally, with no upfront hardware investments and maintenance costs, collections teams can scale their operations up or down at a moment’s notice with speed and ease. Better still, cloud-native applications will automatically update and ensure ongoing support as new digital systems become available.

With data-driven, cloud-based applications, businesses can eliminate the stresses of maintaining legacy systems and implementing non-cloud-native software, letting their collections teams focus on essential tasks. This frees up opportunities for staff to refine customer segmentation approaches and develop more successful collection strategies in the long term.

About Michael Backes

Michael Backes has 20 years in the tech industry as an entrepreneur helping organisations transform their legacy frameworks into digital-first models. In 2019 Michael brought his experience building next-generation financial services to the debt management industry and co-founded and launched receeve GmbH, a cloud-native solution for the collections & recovery industry. receeve is venture capital funded and growing the team aggressively in the EU & LatAm markets. receeve transforms debt management with a comprehensive data layer and ML/AI helping internal teams recover more by optimising processes, strategies, engagement, and asset management.

About receeve

receeve is a fully customisable all-in-one platform for collections & recovery. We simplify the growing complexity of data and systems and empower in-house teams to easily automate processes, engage customers and apply 360° insights to maximise recovery and minimise risk across every stage of credit management – from pre-delinquency to portfolio assignment or sale. A perfect balance of ease-of-use and power, receeve’s cloud-native, no-code platform is fast to deploy, simple to manage and easy to customise, and expand.

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Keywords: cloud services, cloud banking, digitalisation, TPP, online security, cloud payments
Categories: Fraud & Financial Crime
Companies: receeve
Countries: World
This article is part of category

Fraud & Financial Crime


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