FIs failing to adequately secure cloud, leading to huge losses
BSO, a global pioneering infrastructure and connectivity provider, today revealed new research uncovering a resilience paradox suggesting that financial institutions have come to tolerate poor cloud connectivity experiences.
Nearly all IT decision makers rated their connectivity as being extremely or very resilient, yet all had experienced outages to some degree with almost half experiencing outages at least monthly.
Not moving to more reliable cloud options is costing financial institutions 21%-50% of revenue on average yet only 2% of financial institutions are planning to change cloud providers in the near term, the researchers state.
The findings are a surprising contradiction given the availability of cloud solutions on the market that guarantee 99.99% uptime and 100% data durability for object storage.
Other key findings include:
Performance: In all sectors and countries average losses for financial service firms due to poor network performance topped $67m for the past 12 months.
Data security: The most pronounced impact that security breaches had on businesses was on lost or misdirected payments, with more than half of businesses (52%) experiencing them, closely followed by the inability to access accounts or accounts suspended (47%) and inability to use the full, promised functionality of cloud-based applications (41%).
Global scale: 2 in 5 (38%) respondents said poor cloud connectivity stopped them from expanding into a new geographic market. Nearly half (48%) said it stopped them from launching a new product or service. More than 2 in 10 (22%) said it stopped them from expanding into a new sector.
Top considerations for selecting a new cloud connectivity provider: Quantity of cloud on-ramps (51%), technology and services that align with business needs (49%), low number of transactions needing repairs or returns (48%), the ability to exit with no risk of vendor lock-in (39%) and better choices of currencies (39%) were the top five considerations for businesses when selecting a new provider.
The pandemic effect: Contrary to popular belief, the pandemic was not a major stimulus of cloud investment because most businesses (99%) had already started using cloud to access applications before the pandemic. The research also found a north-south cloud divide when comparing markets across several cloud performance metrics.
The north-south cloud divide key findings include:
- Low latency: On average firms lost $14m due to lost trades in the past 12 months due to the inability to achieve low-latency goals.
- Scaling resources: Over $25m in revenue was lost in the last 12 months on average from the inability to effectively scale resources.
- Sourcing real time market data: The inability to source real-time market data cost banks $18mn on average.
BSO CEO Michael Ourabah says, “The importance of cloud technologies is well-established among financial service institutions, but this is the first report of its kind to uncover the impact of poor cloud connectivity on the commercial success of businesses. The losses financial service institutions have witnessed in the last year due to poor cloud connectivity should be a wake up call to the industry.
"The findings raise an important question - why are institutions hesitating to make changes to their cloud connectivity when solutions are readily available? Whatever the answer, the most successful institutions will be those that take a proactive approach to their cloud strategy.”
The report, 'Cloud connectivity and the future of financial markets', is based on a survey of 600 IT decision makers in financial service sectors including banking, trading, brokerage, financial exchanges and crypto exchanges.