The adoption of public cloud services in the financial sector has increased rapidly over the last decade. But even if the technology brings many benefits it also faces challenges, a new first-of-its-kind report from the US Department of the Treasury says.
The Adoption of Cloud Services report finds any institutions see reduced costs, ability to rapidly deploy new IT assets, faster development of new products and services, and enhanced capabilities for security and resilience as motivation to increase cloud adoption. The Covid-19 pandemic sped up the need for more cloud-based services as customer demand for innovative offerings through digital channels grew, and as institutions faced growing demands to work more remotely.
“Cloud adoption could represent a significant change to financial institutions’ internal operations and delivery of services to clients and customers.”The Financial Services Sector’s Adoption of Cloud Services report
“Financial institutions of all sizes increasingly view services provided by Cloud Service Providers (CSPs) as an important component of their technology program, and cloud adoption could represent a significant change to financial institutions’ internal operations and delivery of services to clients and customers”, the report reads.
However, even if cloud services can increase access and reliability, the report found that “financial service firms ramping up their reliance on cloud-based technologies need more visibility, staff support, and cybersecurity incident response engagement from CSPs”.
As financial institutions are still exposed to risks associated with technical vulnerabilities at CSPs, many institutions express concern over cyber vulnerability that CSPs may potentially have. Other challenges and concerns included:
- Insufficient transparency to support due diligence and monitoring by financial institutions.
- Gaps in human capital and tools to securely deploy cloud services.
- Exposure to potential operational incidents, including those originating at a CSP.
- Potential impact of market concentration in cloud service offerings on the financial sector’s resilience.
- Dynamics in contract negotiations given market concentration.
- International landscape and regulatory fragmentation.
“By building trust, cooperation, and collaboration at the outset, we can promote safe and effective migration for financial institutions that choose to adopt cloud services.”Wally Adeyemo, US Deputy Treasury Secretary
Cloud services steering committee
To address these findings, the Treasury has launched an interagency cloud services steering committee with the aim of bolstering regulatory and private sector cooperation. The new group will act on findings through:
- Closer domestic cooperation among US regulators on cloud services.
- Additional tabletop exercises with the private sector.
- Development of best practices for cloud adoption frameworks and cloud contracts.
“There is no question that providing consumers with secure and reliable financial services means greater demand for cloud-based technologies,” said Deputy Secretary of the Treasury Wally Adeyemo.
“Treasury is committed to working with financial regulators, industry partners, and CSPs to drive greater collaboration and transparency. By building trust, cooperation, and collaboration at the outset, we can promote safe and effective migration for financial institutions that choose to adopt cloud services.”
The report was developed with input from US regulators, private sector stakeholders, trade associations, and think tanks. Read it in full here.