The benefits of cloud banking, explained

From shopping to dating to remote work, it feels like everything has moved online these days. We’re living through a period of rapid innovation, and there’s no going back — the internet has already improved our lives in immeasurable ways, but it’s only the beginning. 

The pace of innovation is also leaving a mark on the banking industry. Customers are ready to do away with branch visits and tedious paperwork. At the same time, they don’t want their bank to compromise on security. That's where cloud banking comes in. Here, we’ll discuss what banking on the cloud really means, its advantages, and how N26 goes the extra mile to keep your money secure.

The benefits of cloud computing for banks are countless, including faster transactions and real-time account updates, unbiased fraud detection and prevention, and faster data processing and analysis. Cloud computing also provides a foundation for more exciting financial products, because it offers an agile, scalable environment for product development teams. And with security standards evolving quickly in the digital age, innovating doesn’t have to mean starting from scratch anymore.  

But to understand the benefits of banking on the cloud, it’s helpful to review what pre-digital banking looked like.

Before computers were invented, banks managed customer accounts on hard-copy ledgers. All transactions had to be processed in a branch by a bank employee. 

Starting in the 1970s, banks began storing their data on devices called mainframes. At the time, these large computers were a massive innovation, allowing banks to process and house data at scale. Still, it was time consuming, and the systems were often bogged down. 

“Few people know this, but bank holidays were actually invented to allow mainframes to catch up,” explains Travis Carelock, Deputy Chief Information Security Officer at N26. “Worldwide, all payments on mainframes are done in so-called ‘batch jobs.’ The queues for these batch jobs grew really long, and bank holidays were the days when they had a chance to catch up on the backlog.” Besides taking a lot of time, the mainframes of that era took up some serious space — and with high security costs to match.  

Then, the internet happened, ushering in new solutions for storing, managing, and processing data. One such solution was cloud computing. With cloud computing, data is stored on a globally distributed cluster of computers, rather than on one single device. This means that data is both secure and accessible from anywhere. And while mainframes can be just as safe as cloud computing systems, the latter offer some real advantages in terms of agility and security. 

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“The issue with mainframe systems is how static they are,” says Vincent Junik, Director of Security Engineering at N26. “If you want to change one piece of code, that can impact the whole system.” 

Cloud computing, on the other hand, is anything but static. Because the code is distributed across different servers, portions of a cloud network can be reworked without toppling the entire system. Furthermore, the cloud provides a flexible framework to continuously tighten security standards and quickly respond to threats. 

“These days, financial criminals use AI and machine learning to steal money and data,” says Olaf Hoffman, who leads Anti-Financial Crime Product development at N26. “We use the same tools in the cloud — but to protect money and data.” He points out that, for banks, one advantage of the cloud is that they can use state-of-the art technologies for fraud detection and prevention. This is thanks to more robust data processing and analysis. Mainframes simply can’t process data at the same speed. And though converting mainframe systems to the cloud is possible, it’s time consuming and expensive.

Here is where being a digital bank has its perks. “We don’t have the technical baggage some traditional banks have,” explains Carelock. The cloud also allows us to innovate at scale: “Working with cloud computing also means that we can add new technologies or features that don’t require the whole system to be revamped,” adds Junik. 

But employing the latest technology doesn’t guarantee good security. Keeping our customers safe requires deep investment in our processes and teams, something we’ve prioritized from the very beginning. 

Back in the early days, N26 made a concentrated effort to invest in security. We’ve invested in building a robust security team because customers put their trust in us. We have the privilege to show them what we already know: that seamless digital banking doesn’t mean sacrificing security. 

With the help of cloud computing, the N26 security team provides engineers with tools and technology that make it simpler to work securely. “We work on software to support teams, using cutting-edge technology to keep customer accounts secure,” says Junik. “Each time an engineer tries to test some code or work on a new development, all their tests are continuously checked with a security tool.”

Another part of this, Junik says, is thinking like a hacker. “When you hear about really bad data breaches, hackers often don’t just use one vulnerability. They enter the system, then they find ways to pivot and move around within the system. Ensuring that we have in-depth security at all levels means that, even if one aspect of the system were to be breached, hackers will be blocked from moving to multiple areas. We explicitly define what is normal activity — and everything else is abnormal. This makes it very hard for malicious actors to hack into our infrastructure.” 

At the end of the day, security is less about an individual or even an entire team. It’s about culture at an organizational level. That’s why everyone who works at N26 is part of a wider security team — whether their job title is in marketing, product design, or Customer Support. 

Building on the cloud is a major part of N26’s approach to security, but it’s not the only part. Junik, Carelock, Hoffman, and their teams work closely with their counterparts in engineering and product to build processes that protect against potential threats. “For every software that we develop, we have a service security framework, and we have hundreds of them that are used to develop the security,” explains Junik. Where other financial institutions may only check for security threats after their products have been developed, “we take a much more holistic approach.” 

Is it hard work? Sure — but it’s all part of building the future of banking. And we don’t have a future if we don’t protect our customers’ futures. So, forgive us for having our heads in the cloud — it just happens to be a great place to bank.

At N26, we offer our customers convenient, digital banking — without compromising on security. You get extra peace of mind, thanks to security features such as biometric authentication, smartphone pairing, and 3D Secure technology. Receive instant push notifications for every transaction, so you know what’s happening on your account at all times. Want to know more about staying safe online? Check out our online security guide.