A one-time niche, techie phrase, "cloud computing" is a concept that has been in the mainstream public consciousness for a little while now.
According to a recent report from IDC Financial Insights, banks should embrace the cloud, specifically by creating cloud payments platforms.
I recently spoke with Aron McPherson, who authored the report for IDC, for an upcoming article on payments services hubs, and he said banks should be more aggressive in establishing cloud payments services.
He stresses that the term "payments in the cloud" -- the title of the report -- refers not to a migration of existing payment systems to the cloud but rather to the ability of cloud services to accept payments. Currently, payment for cloud services occurs separately from the delivery of those services.
The biggest way cloud payments services can be used in the near future, said McPherson, is for apps and online games. Currently, PayPal is pioneering this service to extend its reach beyond the eBay platform with its with "PayPal X," a set of open APIs (Application Programming Interface) that developers could use to enable their customers to make in-app purchases using their PayPal credentials.
All of the cloud payment platforms announced so far, like PayPal's, have been created by nonbanks, but there is no reason why a bank could not also create its own set of open APIs --or those created by developers -- either for superior integration with one of the nonbank platforms or for the direct use of its commercial clients, says McPherson. For example, a commercial treasury unit could use cloud payments technology to enable clients to connect directly from their ERP systems to the bank's payment processing systems, reducing customer support costs and exception rates.
"Banks should have a startup-friendly attitude and encourage developers to come to them [to create API's]," McPherson says.
McPherson says with cloud payment offerings, banks can cut out middlemen such as PayPal and compete directly for business in digital content markets.
"We're not positioning cloud payments as a defensive technology," adds McPherson, noting that banks will always have a secure position at the heart of commerce. But they should be aggressive in using cloud payments services to corral revenue currently going elsewhere.