Cloud ‘within reach’ to unlock banking sector’s future

Research issued by law firm Pinsent Masons and the British Bankers’ Association (BBA) identifies seven hurdles that the industry must overcome in adopting cloud technology.

According to Pinsent Masons, outside the banking industry public cloud computing drives innovation and enables new competitors, products and more flexible business models.

“From blockchain to artificial intelligence (AI), there is huge potential for the banking and wider financial services industry to use this technology to help new groups of customers access finance, develop new investment tools, and understand the value of the financial data they hold,” reports the law firm.

“Banks have responded to customer demand for innovative digital services, yet the challenge of how can banks adopt public cloud solutions with confidence and avoid exposure to regulatory and compliance risk, remains.”

The firm has collaborated with the BBA to identify the hurdles to banks’ adoption of cloud technology. A cloud working group for BBA members has been created to help solve the legal, regulatory and commercial challenges that make it harder for banks to use cloud technology.

Among the seven hurdles to cloud adoption identified in the ‘Banking on Cloud’ report are:

• Difficulty in understanding whether use of a specific public cloud technology enables a ‘critical’ or ‘important’ operational function of a bank.
• Uncertainty as to what amounts to effective supervision and oversight of a public cloud provider, and its supply chain.
• Issues concerning the location of data including transferring data outside the European Economic Area (EEA) and access to data by law enforcement authorities.
• Issues concerning the management of data including security, data breach reporting and ensuring that new obligations soon to come into effect such as privacy by design and default can be effectively met.

“Innovation teams within banks know that a confident cloud adoption strategy is the only way forward and essential to the future of competing effectively in financial services,” said Luke Scanlon, head of fintech propositions at Pinsent Masons. “Banks must put their customers in control, before fintech companies as well as the technology giants take away significant market share.

“Banks, cloud service providers, regulators and policy makers should work together to identify and prioritise activities that clarify ways to meet the objectives of the regulatory regime in a public cloud computing context; and create a more harmonised regulatory framework for the adoption of public cloud computing in banking.

“Specifically, this requires more clarity around what data and which banking functions can be supported by cloud-based technology, how effective oversight of complex cloud supply chains can be achieved, how the regulator can best achieve its own oversight objectives and how best to prepare for, in future, banks transitioning from one cloud service provider to another.”

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