Regulators Try to Clear ‘Fog’ Around Cloud-Based Financial Data

Regulators have grown uneasy about the risk that the cloud poses to the financial system.

That’s according to a Thursday (June 15) opinion piece by Gillian Tett of the Financial Times (FT). The piece cited a May U.S. Treasury report that found that 90% of American Banking Association members are moving activity to the cloud.

With cloud usage expected to triple in the next three years, regulators are not prepared to deal with growth on this scale, per the FT report.

“They have always struggled to track information technology, since they have historically hired economists, not techies,” Tett wrote. “But when finance companies were running their own IT operations, regulators did at least have a mandate to watch them.”

Tech giants like Amazon and Google will chafe at efforts to put them under the oversight of central banks and other regulators, the report said, and the White House “shows little stomach” to take up that fight.

The Treasury report said: “[D]ue to the different legal authorities for each agency, no single agency can see across the many use cases and the network of dependencies on cloud services within the financial sector.”

“In plain English: this is a fog,” Tettt wrote.

While the issue is a complicated one, Tett concluded that — if nothing else — it helps underline that artificial intelligence (AI) isn’t the only important tech topic of the day.

Banks are turning to the cloud as they realize the limits of their longtime proprietary solutions, which had been enough to handle payment functions until recently, Dave Scola, U.S. CEO for Form3, told PYMNTS in April.

“But now bank clients are demanding more flexibility and higher levels of services,” Scola said at the time. “The banks want to address those demands but are now looking at the hulking dinosaurs of their legacy platforms and trying to figure out how they can accommodate those demands.”

Meanwhile, PYMNTS spoke earlier this week with Ken Beer, general manager of AWS Key Management Service at Amazon Web Services.

He argued that acquirers will need to embrace the cloud to remain competitive and offer customers the best possible payment experience, while also lowering costs.