Finadium: Cloud Computing Adoption Curve and Risks in Institutional Financial Markets

Cloud computing is an attractive opportunity in capital markets for cost management, security and effective service delivery. With 29 out of 30 Global Systemically Important Banks (G-SIBs) reporting a cloud partnership, the rest of the industry without a cloud solution will soon follow. A new Finadium research report, “”Cloud Computing Adoption Curve and Risks in Institutional Financial Markets”, has been written for business, product development and technology managers at financial services firms to understand the state of cloud adoption in the capital markets industry.

In this report, we survey the activity of major providers of cloud services and large banks signing on as users. We find that the promise of cloud services is real and that new business processes and ways to innovate are opening up: the cloud appears to be a legitimate alternative to the problem of maintaining a physical plant with hardware and software that must be continually updated.

While cloud services offer advantages, there are open questions about what should go in the cloud from a capital market perspective: can cloud services be as fast as dedicated networks? Is there a level of client sensitivity that would preclude some information moving to a public cloud versus a private cloud? The expectation is that most, if not every, banks and large asset managers, as well as most mid- sized firms, have or will soon have a cloud strategy. The next step is to use the cloud for what it can do best while maintaining non-cloud solutions for their own perceived benefits.

Individually, the cloud is a good thing for capital markets: it makes sense to lower costs and share computing power by outsourcing infrastructure, software, and platform development. Lower costs and a better managed infrastructure means more ability to experiment and faster time to market. There is no particular limit to the types of applications that can go on the cloud — from trading software to banking to analytics — so long as the cloud provider can ensure security, robust connectivity to trading platforms and reporting, and connect to the compliance infrastructure required to monitor these activities (which itself might be hosted in the cloud).

At the same time, the cloud could be the source of the single biggest disaster to hit the financial services industry since the Global Financial Crisis. While the odds of a massive security breach or delivery failure are relatively low, they should be recognized up front as a potential scenario.

Finadium subscribers to our Fintech Capital Markets series can log in here to access this report.

A direct link to the report for Finadium clients, when logged in, is http://finadium.com/finadium-report-desc/cloud-computing-adoption-curve-and-risks-in-institutional-financial-markets/

For non-subscribers, more information is available here.

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