Seven hurdles identified for cloud technology in banking sector

A Cloud Computing Working Group has been set up for BBA members to help identify and solve regulatory and commercial challenges which make it difficult for banks to harness the full power of the cloud.

The BBA is the voice of banking in the UK and the leading trade association with 200 member banks headquartered in more than 50 countries and 180 jurisdictions.

The banking industry is responding to customer demand for innovative digital services but exposure to regulatory and compliance risks need to be addressed, claims a specially commissioned report Banking on Cloud.

Luke Scanlon, head of Fintech propositions at Pinsent Masons, said: “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. Banks must put their customers in control, before fintech companies, as well as the technology giants, take away significant market share.”

The Banking on Cloud report identifies seven hurdles which could hamper adoption of cloud technology in banking services, including effective supervision and oversight, issues concerning the location of data and transferring data outside the European Economic Area and access to data by law enforcement authorities, and issues around security, data breach reporting and obligations on privacy.

Mr Scanlon added: “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 banks transitioning from one cloud service provider to another.”

Outside of the banking industry, public cloud computing drives innovation and enables new competitors, products and more flexible business models.

From blockchain to artificial intelligence, 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.