Cloud computing is taking the business world by storm. There don’t appear to be many aspects of doing business that are left untouched by the cloud. According to the IDG 2020 Cloud Computing Study, 92% of companies have their IT environments at least partially in the cloud, while only 8% say their total IT environment is all on-premise. The study finds that one-third of the entire IT budget across sectors is allocated to cloud computing.
And financial industry is no exception. The latest Cloud Usage in the Financial Services Sector study conducted by Cloud Security Alliance finds a similar adoption rate — 91% of financial institutions are actively using cloud services or plan to do so over the next six to nine months — double the rate of only four years ago.
So, the question is — how can financial institutions take advantage of the cloud computing benefits while mitigating risks associated with the cloud environment?
- The Promise of Cloud Computing
- Why is Security Important in the Cloud?
- Fully Secure Cloud Integration is not Impossible
- Cloud Security for the New Era of Financial Services
The Promise of Cloud Computing
Although financial services were initially slow to adopt cloud technology, having spent years on the cloud sidelines, the sector has been catching up lately. The latest Nutanix ‘Enterprise Cloud Index Report’ for the financial services sector shows that an increasing number of financial services firms embrace cloud technology, reporting a 21% adoption rate of hybrid cloud in the sector — higher than the global average of 18.5%.
As the cloud technology adoption rate increases, there don’t appear to remain many use cases entirely off-limits for the technology; even core banking has been transitioning to the cloud. The benefits of the cloud include
- Enhanced agility, scalability and elasticity: clouds deliver agile, flexible, and cost-effective information system services
- Cost-effective solution for data and applications storage and deployment of more efficient processes or data-intensive applications
- Competitive advantage: customers are provided with quicker transaction processing times and personalized offering.
Still, to take full advantage of these cloud computing benefits, it’s essential for financial institutions to understand security in the cloud and recognize and mitigate risks that arise from this type of environment.
Why Is Security Important in the Cloud?
Data security has been top of mind for financial institutions. The financial services industry contributed 62% of exposed data in 2019, although the sector accounted for only 6.5% of data breaches. It has one of the highest costs per breached record (on average $210 per record), second only to healthcare ($429).
With cloud computing, companies give up direct control over some security and privacy aspects and grant a level of trust to the cloud service provider. At the same time, they remain accountable for the confidentiality, integrity, and availability of the IT system and related data and applications hosted by the cloud service provider.
Because of the strict compliance and regulatory requirements, the private cloud was the natural initial move for the financial services in their journey from the traditional on-premise, server-based IT infrastructure to the cloud.
But with time, cloud service providers appear to have matured their security, compliance, and resiliency capacities. Nowadays, the cloud can offer enhanced security compared to in-house, server-based infrastructure. As a result, many financial institutions seem to take a hybrid cloud approach — one that involves both private and public cloud — to balance security and costs.
Full Secure Cloud Integration is not Impossible
Others go all-in on the cloud. For example, Equifax — the leading US credit report services firms — invested more than $1.5 billion and transitioned its whole IT infrastructure to the cloud to ensure that data security was fully embedded into its systems.
As the technology evolves, cloud service providers are increasingly capable of running more modern, secure infrastructure than many financial services firms could do in-house. Cloud security is distinctive because cloud providers have unique tools that are native to their own cloud environments. They will usually take responsibility for the security of the lower-level infrastructure layers.
The shared security responsibility between cloud providers and the companies affects how financial services should manage and prepare for security risks. With the right third-party security partners and a profound understanding of the notion of shared responsibility, cloud cyber risk can be mitigated effectively.
Cloud Security for the New Era of Financial Services
Attracted by the promise of lower costs and enhanced scalability, financial services firms are rapidly adopting cloud technology. Some are advanced at transitioning into the cloud. For example, Capital One has completely transitioned to a cloud-only IT environment — the bank has closed all its physical data centers and moved all operations into an Amazon Web Services (AWS) public cloud.
The question for financial institutions now is not whether to migrate to the cloud or not, but how to transition to the cloud securely.
Here, it’s essential to recognize that moving data to the cloud doesn’t mean the company’s responsibilities for securing it are moved too. The shared nature of the cloud environment is at the center of understanding the distinctive nature of security in the cloud.
The shared model defines which security tasks are the responsibility of the cloud service provider and which are the duty of the company. Within this model, financial institutions must have complete clarity over which security responsibilities they delegate to their cloud provider and which they need to manage in-house to ensure they have no security gaps.
With a trusted third-party cloud service provider and a deep understanding that the main responsibility of data integrity lies on the company — not the cloud provider— financial institutions can replace outdated on-premise IT infrastructure and leverage modern technology to secure competitive advantage by delivering better customer experiences, at a lower cost.
Let Our Managed IT Solutions Team Help
Indellient is a Managed IT Solutions provider that works with companies in all industries to deliver superior value and technical innovation. Whether you’re looking to reduce bandwidth constraints on your internal IT teams or are in need of project leadership in cloud migration, DevOps planning, and execution, or data processing and analytics, Indellient is here to help.