Home Tech Updates FIs fail to adequately secure the cloud, leading to huge losses

FIs fail to adequately secure the cloud, leading to huge losses

by Helen J. Wolf
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BSO, a global pioneering infrastructure and connectivity provider, unveiled new research that reveals a resilience paradox suggesting that financial institutions have come to tolerate bad experiences with cloud connectivity.

Nearly all IT decision-makers rated their connectivity as extremely or very resilient, yet all had experienced outages to some degree, with almost half experiencing outages at least monthly.

The researchers say that not switching to more reliable cloud options costs financial institutions an average of 21%-50% of revenue. Still, only 2% of financial institutions plan to switch cloud providers in the near term.

The findings are a surprising contradiction given the availability of cloud solutions that guarantee 99.99% uptime and 100% data durability for object storage.

FIs fail to adequately secure the cloud, leading to huge losses

Other key findings include the following:

Performance: Across industries and countries, average losses for financial services companies due to poor network performance over the past 12 months exceeded $67 million.

Data security: The most apparent impact security breaches had on businesses was on lost or misdirected payments, affecting more than half of companies (52%), followed closely by the inability to access accounts or accounts suspended (47%) and failure to use the full, promised functionality of cloud-based applications (41%).

Global Scale: 2 in 5 (38%) respondents said poor cloud connectivity prevented them from expanding into a new geographic market. Nearly half (48%) said it prevented them from launching a new product or service. More than 2 in 10 (22%) said it prevented them from expanding into a new industry.

Key considerations when selecting a new cloud connectivity provider: number of cloud ramps (51%), technology and services that match business needs (49%), low number of transactions to be repaired or returned (48%), ability to exit without risk of vendor lock-in (39%) and better currency choices (39%) were the top five considerations for companies when selecting a new provider.

The pandemic effect: Contrary to popular belief, the pandemic was not a major incentive for cloud investment. Most companies (99%) had already started using the cloud to access applications before the pandemic. The research also found a north-south cloud gap when comparing markets across cloud performance metrics.

The main findings of the north-south cloud distribution are:

Low latency: Businesses lost an average of $14 million due to failed transactions in the past 12 months due to the inability to meet soft latency goals. Scaling Resources: Over the past 12 months, an average of more than $25 million in revenue was lost due to the inability to scale resources effectively. Buying real-time market data: The failure to obtain real-time market data costs banks an average of $18 million.

Michael Ourabah, CEO of BSO, said: “The importance of cloud technologies is well known among financial services companies, but this is the first report of its kind to expose the impact of poor cloud connectivity on the commercial success of companies. Suffering over the past year due to poor cloud connectivity should be a wake-up call for the industry.

“The findings raise an important question: Why are institutions hesitant to change their cloud connectivity when solutions are readily available? Whatever the answer, the most successful institutions will be those who proactively approach 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 services sectors, including banking, trading, brokerage, economic exchanges, and crypto exchanges.

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