Cloud computing has revolutionized the data storage industry. Businesses in every sector are considering using it to become more competitive. Some of the largest banks in the world are interested in cloud computing, but there are a number of legal challenges that are keeping them from taking the leap. Here are some reasons they will need to get past them in the future.
Existing Regulations Deter Banks from the Cloud
Financial regulators haven’t passed any policies specific to cloud computing. However, they have passed a number of other regulations that do apply to cloud computing which can keep banks from using it. The Federal Deposit Insurance Corporation and the Office of the Comptroller of the Currency have both warned that banks need to do their due diligence before using the cloud. Some of the laws that deter banks from using it include:
- Data Security. Virtually every financial regulator in the world has strict data security laws that every financial institution must abide by. They need to prove that customer data is protected from hackers. Cloud providers have some of the best security, but they need to earn the confidence of financial authorities before institutions can use them.
- Data Sovereignty. Data sovereignty laws require companies to store customer information on servers in the countries their customers live in. Many technology groups are requesting that the Geneva Convention change its policies to allow companies to store data on servers in other countries.
- Auditing Requirements. Regulators need to be able to audit financial organizations to ensure they are complying with existing laws. They may have a much harder time doing this when data is stored on a server in another jurisdiction.
- Customer Liability. A financial institution may abide by all applicable regulations, but that doesn’t absolve them of responsibility if data is compromised. Leaders of some financial companies in Canada have said that they are reluctant to store data on cloud servers in the United States, because they would be legally liable for privacy breaches if the NSA gained access to it.
These concerns have deterred some financial institutions from turning to the cloud. However, they will probably be more inclined to use it in the future as these issues are addressed. Chris Skinner, Chairman of the Financial Services Club, recently said that many institutions aren’t using the cloud because they are afraid that they would violate some of these laws.
The Appeal for More Banks
While there are a few laws that deter banks from using cloud computing, there are far more benefits that will encourage them to use it in the future. Here are some reasons many intend to use it when these legal challenges are addressed:
- Cloud computing has better security.
- It has more storage space as their data needs continue to increase.
- Financial institutions will find that it is easier to use the cloud to mine data to improve the quality of services for their customers.
There are clearly many reasons that banks will turn towards the cloud. However, they will need to be confident that they can satisfy the legal requirements first.
About the author: Kalen Smith is a former engineer who writes about cloud computing. He suggests that people who need a cloud computing company consider working with http://www.togglebox.com/.