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, and
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 organizations 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 maximize the potential of technology by migrating more core workloads to the cloud, and 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 rationalizing rules and guidance to cloud adoption in the financial sector, which has helped significantly stimulate adoption. But further assurances and harmonization 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.
To learn more about these findings and more, download our infographic and our full report.
Research methodology
The survey was conducted online by the Harris Poll on behalf of Google Cloud, from December 7, 2020, to January 4, 2021, among 1,363 senior executives in France (n=113), Germany (n=178), the UK (n=192), Hong Kong (n=99), Indonesia (n=100), Japan (n=142), Singapore (n=71), Australia (n=134), Canada (134), and the United States (n=200) who are employed full-time, part-time, or self-employed whose main functional role is in risk/compliance or IT at a company in the banking, finance, or financial services industry with a title of director level or higher. The data in each country were weighted by the number of employees to bring them into line with actual company size proportions in the population. A global post-weight was applied to ensure equal weight of each country in the global total.