Regulatory complexity hinders cloud adoption by financial services firms, Google study finds

by Joseph K. Clark

The pace of cloud adoption by financial services companies has increased markedly in recent years. However, progress is still being hampered by regulatory uncertainty and the complexity of legacy systems.

According to a Google Cloud survey of 1,300 leaders working within the financial services space in organizations based in the US, Canada, France, Germany, the UK, Japan, Singapore, and Australia.

The research, conducted on the public cloud giant’s behalf by market intelligence agency Harris Poll, pinpointed several barriers that slow the pace of migration to the cloud for financial services companies.

“The barriers to adoption vary, from the complexity of legacy systems, to trust and skills gaps, regulatory uncertainty, and fragmentation of compliance requirements,” the company said in a statement.

“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 harmonization and streamlining.”

Most respondents (83%) said they are using the cloud as their “primary computing infrastructure”, with 38% relying on a hybrid setup. In comparison, 28% rely on a single cloud to meet their organization’s IT needs. A further 17% said their organization favors a multi-cloud approach.

financial services

Of the companies yet to have gone down the multi-cloud route, 88% said they are considering shifting their cloud strategy to accommodate multiple providers within the next 12 months.

Many survey respondents said they have migrated “substantial workloads” to the cloud, but there is still some reluctance when shifting core, back-office applications off-premise.

“Across Europe, cloud usage for core activities like underwriting scored low, with the UK listing only 30% adoption,” said Google. This is even though more than 88% of those surveyed said they feel strongly that using the cloud will benefit their organizations and how they operate, particularly when meeting their regulatory compliance obligations.

The report also indicated that “regulatory-induced challenges” create hurdles that prevent financial services companies from moving to the cloud as quickly as they would like.

Most respondents (84%) agree that regulatory reviews and approvals take too long because of regulatory fragmentation across regulatory bodies,” said Google. “And 78% say that regulatory uncertainty over the use of public cloud prevents their organizations from adopting cloud technologies that would otherwise benefit them.

“Additionally, a third of all on-premise respondents (38%) say that the large investment of resources for the regulatory approval process is why they are not using cloud services.”

Jerry Silva, research vice-president for IDC Financial Insights, said the survey highlights just how varied the pace and progress of cloud adoption are across the financial services industry.

“While many banks have already deployed hybrid cloud environments, others are still in various stages of planning and deploying,” said Silva. “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.”

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