Navigating the cloud’s challenges in financial services

Published : 2 months ago, on 06/08/2024

By Charlotte Webb, Operations and Marketing Director of Hyve Managed Hosting

Financial services (FinServ) firms no longer need to be convinced of the value of the cloud for businesses. Economic uncertainties and disruptions, such as increasing inflation, growing interest rates, and the pandemic, have been powerful drivers for digital transformation initiatives such as the cloud within the financial sector. Alongside the challenges, the emergence of innovative payment solutions and AI and blockchain technology has also fuelled progress in the financial industry. As such, financial institutions recognize the value of cloud infrastructure as we navigate from original cost optimization to the current day, where security, data analytics and scalability are crucial, with 91% of FinServs viewing a cloud-first approach as an essential factor in business growth.

However, as more FinServ firms embrace the shift toward more agile and resilient cloud infrastructure, they face specific challenges such as complex regulatory compliance landscape, data security, integration challenges and cost management constraints. FinServ organizations need to understand the key issues and best practices for secure cloud deployment, compliance, data migration and management to successfully navigate cloud technology in a highly regulated and competitive industry such as finance.

As a guideline for smooth navigation through the cloud transformation, FinServ organizations could consider further suggestions in this article.

Best practices for cloud migration for FinServ

Develop a strong foundation: To successfully adopt and leverage cloud technologies, FinServ organizations need a clear vision of how these solutions will improve performance, streamline operations and enhance security across the business. Key considerations include designing an architecture that supports scalability, provides security, integrates seamlessly with existing systems where required and is cost-effective.

By integrating the latest and most advanced cloud technologies and stringent security protocols from the earliest days of working in the cloud, FinServ organizations will unlock the full potential of modern cloud solutions and gain a competitive edge in today’s digital-first marketplace.

Prioritize risk management: Centering cloud transformation strategies around data risk management for optimal data security is paramount for financial institutions. In 2024, 86% of data breaches in the financial services industry involved a cloud asset. That’s why FinServ firms must consider comprehensive risk assessments to identify vulnerabilities and develop robust security protocols.

The industry’s severely low tolerance for downtime means businesses must regularly update and test their disaster recovery strategy to achieve a low recovery time objective (RTO) and recovery point objective (RPO). To combat ransomware threats amid cloud migration, companies can adopt advanced threat protection (ATP) strategies that leverage machine learning, behavior analysis, and signature-based detection to identify and block these attacks as they initiate.

Robust security features such as data redundancy, versioning, and isolated backup storage also help businesses maintain secure backups and ensure no data is compromised when faced with evolving threats.

Leverage expertise and internal communication: For organizations without in-house expertise, the complexity and ever-changing nature of cloud technologies can present challenges at all stages of cloud adoption. Critical aspects of cloud adoption, such as regulatory compliance, data security and legacy system integration, often require specialised skills. FinServ firms should consider partnering with experienced managed service providers (MSPs) to address potential challenges. MSPs provide critical insights and support to help firms manage costs, comply with regulations and secure the cloud environment.

Adapting to the cloud also involves changes in day-to-day operations so that MSPs can help correctly communicate this shift to the FinServ firm’s employees. Close collaboration between the FinServ organisation’s product teams and the MSP ensures that cloud solutions fully align with business goals and functional requirements.

Consider cloud diversification: FinServ’s organisations should consider diversified cloud platforms from the early days of adopting the cloud. Relying on a single cloud provider, as illustrated by the recent CrowdStrike incident, creates a single point of failure. And if a critical service from that provider is disrupted, it can significantly impact the organisation as a whole. Multi- or hybrid-cloud architectures can help reduce risks and improve overall security by spreading workloads across multiple platforms, some of which could be private clouds. And for many financial services organisations, diversified cloud is already a reality, with 57 per cent of financial services organisations using multiple cloud service providers (CSPs) for their IaaS/PaaS needs.

From migration to innovation

Cloud transformation in Financial Services is more than a change in infrastructure. It’s a strategic leap towards a more agile, secure, and innovative financial future. The accelerated innovation cycles powered by cloud-based solutions enable FinServ firms to introduce new services, experiment with new features and deliver financial services that meet customers’ expectations in the digital age.

FinServ organizations have all the tools to address the unique challenges of cloud migration and on-demand scalability required to compete. As market expectations rise, successful financial services cloud adopters will be better positioned to maintain a competitive advantage.