Why poor cloud connectivity is a major issue for financial services?

By Puja Sharma

BSO, a global pioneering infrastructure and connectivity provider, research revealed uncovering a “resilience paradox” suggesting that financial institutions have come to tolerate poor cloud connectivity experiences.

The sluggishness to move to more reliable cloud options is costing financial services 21%-50% of revenue on average yet only 2% of them are planning to change cloud providers in the near term. 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. 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.

The report, Cloud connectivity and the future of financial markets are based on a survey of 600 IT decision-makers in financial service sectors including banking, trading, brokerage, financial exchanges, and crypto exchanges. Businesses from across the world were surveyed including France, Germany, the UK, the US, Hong Kong, Singapore, and Brazil.

The research also found a “north-south cloud divide” when comparing markets across several cloud performance metrics. France, UK, and US firms consistently estimated considerably higher impacts from poor cloud performance when compared to their southern hemisphere counterparts, Hong Kong, Singapore, and Brazil. Cumulative losses topped $442.67m for France, UK, and US firms dwarfing losses of $64.71m from Hong Kong, Singapore, and Brazil firms.

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 with the US ($64.45m), UK ($16.18m), and French ($15.97m) firms experiencing the most significant losses.

Scaling resources

Over $25m in revenue was lost in the last 12 months on average from the inability to effectively scale resources. The US recognized shockingly higher losses ($142.83m) than the rest of the world and dwarfs UK firms ($15.43m) in second place.

Sourcing real-time market data

The inability to source real-time market data costs banks $18m on average. US banks lost $44.72m followed by UK banks ($14.63m) and French banks ($12.69m).

“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,” said Michael Ourabah, CEO of BSO.

“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,” he added.

Key findings

• 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 over 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: Around 38% of respondents said poor cloud connectivity stopped them from expanding into a new geographic market. Nearly half said it stopped them from launching a new product or service. Over 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 for cloud investment because most businesses (99%) had already started using the cloud to access applications before the pandemic.