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Google Cloud: Cloud Adoption is Increasing in FS, but More Guidance is Needed From Regulators

In August, Google Cloud released the results of a global survey that explored cloud adoption and deployment within the financial services sector.

The survey asked more than 1,300 IT leaders about their organisations’ adoption of cloud for key workloads, perceptions of opportunities available to cloud-forward companies, and the challenges that could prevent continued cloud adoption.

Some key survey findings include:

  • Firms that have adopted public cloud as part of hybrid or multicloud approaches report higher technology satisfaction levels than firms using on-premises computing infrastructure.
  • 83% of surveyed financial services companies report they are deploying cloud technology as part of their primary computing infrastructure.
  • On average, only about half of all workloads have been transitioned to the cloud, meaning that there is still work to be done.
  • Regulatory uncertainty and high cost of the regulatory approval process are the top two obstacles to continued cloud adoption.

Looking to discuss these findings is Zac Maufe, managing director, Google Cloud, Financial Services. With over 20 years of banking experience, having previously worked for Wells Fargo and HSBC Maufe reviews what financial service regulators must do to ensure cloud adoption, seeing as companies are looking more and more likely to use it:

Zac Maufe, managing director, Google Cloud, Financial Services
Zac Maufe, managing director, Google Cloud, Financial Services

The financial services (FS) industry is evolving at a rapid pace, with shifting consumer expectations, new technologies, and developing regulatory requirements. Financial services firms need the right technology to help them stay agile and prepare for the future.

The cloud is a key point of leverage for firms looking to improve performance across a broad range of activities. Moving to the public cloud can advance operational resiliency, improve staff productivity, increase regulatory compliance and enhance business model innovation.

However, there are a number of financial services companies that are still hesitant in their cloud journeys. The barriers to adoption vary, from the complexity of legacy systems, to trust and skills gaps, regulatory uncertainty, and fragmentation of compliance requirements. Although many companies have embraced the benefits of cloud technology, more robust cloud adoption—especially around core back-office functions—will require additional facilitation, including through regulatory harmonisation and streamlining.

A new comprehensive study on cloud adoption in financial services

To better understand the challenges and opportunities of cloud adoption in financial services, Google Cloud commissioned Harris Poll to survey more than 1,300 leaders from the financial services industry across the United States, Canada, France, Germany, United Kingdom, Hong Kong, Japan, Singapore and Australia.

There were five noteworthy takeaways from the study:

  1. A vast majority of financial services companies are already using some form of public cloud. A large number of surveyed financial services companies (83%) report they are deploying cloud technology as part of their primary computing infrastructures. Of those using cloud technology, the most popular architecture of choice is hybrid cloud (38%), followed by single cloud (28%), and multicloud (17%). Notably, of respondents without a multicloud deployment, 88% reported they are considering adopting a multicloud strategy in the next 12 months.
  2. Financial services institutions in North America are leading in cloud adoption. Of the financial services companies who are implementing a cloud strategy, the highest levels of cloud workload adoption were reported in North America, with institutions in the US (54%) and Canada (52%) leading the way. The lowest level of cloud adoption was reported in Japan (42%).
  3. As financial services companies continue to use the cloud, more core functionalities can and will be migrated. While many financial services companies have migrated substantial workloads to the cloud, the industry is far from full adoption when it comes to core, back-office workloads. Of financial services companies currently using a majority cloud strategy in the United States, for example, only half (54%) of their workloads are fully deployed in the cloud. Data and IT security (74%), regulatory reporting (57%), and fraud detection and prevention (57%) rank among the highest workload adoption. Core underwriting activity (40%) and data reconciliation (48%) ranked lowest. Across Europe, cloud usage for core activities like underwriting also scored low with the UK listing only 30% adoption.
  4. Among respondents, there is a very strong positive perception of the potential for cloud technology to assist in business operations and regulatory compliance. Nearly all respondents (>88%) agreed that cloud adoption can:
    • Help adapt to changing customer behaviors and expectations.
    • Enhance operational resilience.
    • Support the creation of innovative new products and services.
    • Enhance financial services institutions’ data security capabilities.
    • Better connect siloed legacy software infrastructure within financial services institutions.
  5. Certain regulator-induced challenges, including the complexity of sectorial compliance frameworks and fragmentation, create hurdles to cloud adoption for financial services companies. While 88% of respondents had a positive view of current regulatory efforts to provide guidance and clarity for cloud implementation, the results showed that more needs to be done to facilitate adoption. Most respondents (84%) agree that regulatory reviews and approvals take too long because of regulatory fragmentation across regulatory bodies. And 78% say that regulatory uncertainty over the use of public cloud prevents their organisations from adopting cloud technologies that would otherwise provide benefit to them. Additionally, a third of all on-premises respondents (38%) say that the large investment of resources for the regulatory approval process is a reason why they’re not using cloud services.

“While many banks have already deployed hybrid cloud environments, others are still in various stages of planning and deploying,” said Jerry Silva, research vice president for IDC Financial Insights. “Clearly, hybrid infrastructure is a reality, and financial institutions must focus not only on leveraging the modern infrastructure model to gain efficiencies, resilience and agility, but also on taking the necessary steps to manage such environments, including the security and compliance of cloud services.”

Future recommendations for financial services regulators

Financial services firms should continue to maximise the potential of technology by migrating more core workloads to the cloud, as well as actively considering multicloud and hybrid-cloud strategies. Such strategies enhance resiliency of existing IT infrastructure and reduce concerns over vendor lock-in.

The research also points to steps that regulators could take to provide additional clarity and guidance, such as aligning regulatory reviews across agencies to avoid fragmentation; developing regulatory “safe harbors” for cloud adopters based on adherence to accepted standards and best practices; training regulatory staff on emerging tech; and advancing data reporting requirements via cloud and related technologies.

In the past few years, many regulators across the globe have taken a robust approach to rationalising rules and guidance to cloud adoption in the financial sector, which has helped significantly stimulate adoption. But further assurances and harmonisation of best practices around supervision is needed to advance risk-based and secure digital innovation.

At Google Cloud, we’re committed to working with financial services customers and regulators to provide them with controls and assurances on risk management, data locality, transparency, and compliance. We are constantly engaging with regulators to share information, respond to their considerations and concerns, and address questions in the interest of transparency and building trust.


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