It’s an industry that’s been a little more reluctant than most to shift its infrastructure and computing needs to the cloud, but it’s an inevitable transition that the financial services sector must embrace.
After all, the raft of benefits cloud computing platforms afford organizations is undeniable – agility, scalability, on demand compute power, competitive pricing models, the list goes on – yet there was always two closely-associated factors that prevented financial services and baking institutions from jumping on board: security and compliance.
However, while naysayers were saying it would never happen and that banks would never entrust their precious data to public cloud providers, many institutions were already experimenting with cloud technologies – even if they weren’t actively announcing it.
The turning point, so to speak, where the world was put on notice as to just how pivotal the cloud could be for the financial services industry, came when Capital One CIO Rob Alexander revealed that the bank was a heavy user of public cloud.
Here was a financial institution with annual revenue in 2016 of $25.5 billion that was actively utilizing and seeking to further embrace the cloud. In fact, as a result of its increased cloud activity, Capital One plans to reduce its data center footprint from eight to three by 2018.
Cathy Bessant, Chief Operations and Technology Officer of $94 billion Bank of America, recently admitted in a Forbes interview that she had changed her stance on financial institutions operating in the cloud.
She admits that it pained her greatly to do a U-turn, but if asked two or three years ago, she would have said that “Bank of America will never be on a public cloud.” She no longer believes this, even admitting that “one day it will happen.”
Benefits of Cloud Computing in Canada
And in Canada, financial institutions have also realized the immense opportunities afforded by cloud computing technologies.
Indeed, a report by the Toronto Financial Services Alliance (TFSA), entitled Cloud Computing: Toronto’s Opportunity Enabler, outlines that “the cloud is the opportunity enabler that can reshape the Toronto region’s financial ICT ecosystem.”
In addition, McAfee’s Blue Skies Ahead? The state of cloud adoption, a focus on the financial services sector report (released April 2016) shows that Canada is leading the way when it comes to cloud adoption in financial services, with an average of 56 cloud computing services currently in use.
If even more evidence was needed of the definitive shift to cloud-based technologies by financial institutions that’s on the horizon, the European Banking Authority’s (EBA) decision to open a consultation on its draft recommendations for financial institutions outsourcing to cloud service providers should suffice.
The EBA’s recommendations are intended “to clarify the EU-wide supervisory expectations if institutions intend to adopt cloud computing, so as to allow them to leverage the benefits of using cloud services, while ensuring that any related risks are adequately identified and managed.”
Nevertheless, the regulatory aspects that remain – and which will unquestionably evolve going forward – cannot be ignored. Governments, financial institutions and regulatory bodies are going to need to have in-depth conversations and bring out new (and updated) compliance regulations. They will have to consider the changing technology landscape, financial demands, constraints, FinTech developments and cloud computing platforms being leveraged by banks, insurers and other financial firms.
Financial institutions will need to display and demonstrate iron-clad regulatory compliance in the future, especially as the cloud becomes a more integral part of their IT operations. It’s a reality that will see many not wanting to shoulder the burden of having to comply, which will put more onus on key technology partners, such as cloud service providers, to step up and provide reassurances.
Knowing that their network infrastructure, data and mission critical systems are being kept safe and in compliance with whatever regulations might be implemented in the future, will be a key factor when financial institutions choose their technology partners.
Legal issues may arise from having to comply with regulations that don’t even exist yet. So, the need to partner with a provider that can predict future compliance requirements and show foresight in delivery of protocol will be crucial.