For businesses in the financial services industry, cybersecurity has never been more important. While cloud computing is technically more secure than traditional on-premises solutions, it still has its own set of challenges. That’s why cloud security is so critical.
A Quick Cloud Primer
While you might have a vague idea of what it is, many are actually unclear of what constitutes the cloud, why it’s important, and how it impacts their businesses and investments. So let’s begin by setting the table a bit.
The cloud, or cloud computing, refers to online computing resources and capabilities individual users can access on-demand through a third-party service provider.
“Practically speaking, it’s the Amazons, Microsofts, Googles, and Alibabas of the world running warehouses full of powerful computers as efficiently as possible by leveraging their economies of scale, dividing them up into ‘virtual containers’ of varying sizes, and then offering them to others as a service for profit,” cloud computing expert Colin Baird writes.
There are a variety of cloud service models, but you’ll typically see them play out in one of three common categories:
This is a software distribution model in which the application is hosted by a cloud service provider (rather than being run locally on each end user’s device).
This is where a cloud service provider develops, runs, and hosts an entire platform and related tools.
Finally, IaaS enables basic computing resource “virtualization” typically used with hardware and physical equipment. The cloud service provider also hosts the infrastructure, providing total scalability.
Regardless of the service model, the cloud provides businesses in the financial services industry with powerful benefits:
- The ability to access files anywhere at any time and from any device.
- The opportunity to collaborate in a variety of new ways.
- Better data integrity and resiliency to protect data from natural disasters or on-premises issues.
- The ability to develop, test, and deploy a variety of new applications.
- Superior data and insights, which makes it easier to track and measure results.
Most of all, using the cloud allows businesses to invest in services to keep them competitive. And with no need to acquire expensive and complicated IT assets, it’s easier to focus on your organization’s core competencies.
Cloud Security in Financial Services
Cloud security is growing fast and has become mainstream in the financial services industry. It has an extremely high adoption rate and is growing as much as 17 percent year over year.
“But as companies move more data and applications to the cloud, IT professionals remain concerned about security, governance, and compliance issues when their content is stored in the cloud,” cloud content management provider Box explains. “They worry that highly sensitive business information and intellectual property may be exposed through accidental leaks or due to increasingly sophisticated cyber threats.”
It’s no longer enough to be aware of the cloud or to use the cloud. You have to understand the need for cloud security so that you can safeguard your business moving forward. Here are a few issues and elements to be aware of:
Cloud Security Compliance
Few industries are as heavily regulated as financial services. There are regulations on what you can say, do, store, share, monetize, etc. These rules address a wide range of security concerns related to privacy, fraud prevention, disclosure, anti-terrorism, anti-money laundering, and anti-discrimination.
While there are dozens of regulations that impact financial services companies, there are two that matter most in the context of cloud security:
- Payment Card Industry Data Security Standards (PCI DSS). This regulation says that all organizations accepting, acquiring, processing, transmitting, or storing cardholder data must safeguard sensitive customer information. Businesses must ensure carefully written contracts. Also, identify third-party relationships and review compliance.
- Sarbanes-Oxley (SOX). This act establishes accountability for financial governance and reporting. It also states that any compromised sensitive data must be quickly reported. In light of this, businesses must implement controls to protect data, monitor access, and develop incident response processes.
Financial services regulators are actively imposing fines on financial institutions that experience service interruptions. They also want to eliminate any sources of systematic risk in technology that these businesses depend on in order to grow their businesses. This has placed an increased emphasis on financial firms to satisfy ballooning regulatory compliance.
“Financial institutions must be proactive to ensure IT operational resilience in an environment susceptible to technical failures, software glitches, cyber attack, human error, and natural disasters,” Google explains. “Any of these factors have the potential to cripple an enterprise. The best way to avoid unanticipated downtime is to add redundancy.”
Redundancy involves backing up all important databases and re-architect solutions that can replicate the existing framework in the instance that it goes down. This is expensive but necessary.
Cyber Threats and Cloud Security
It’s impossible to discuss cloud security without acknowledging some of the extensive threats that exist in the marketplace today. Cloud attacks are becoming more frequent and more costly. There’s more on the line than ever before – particularly in this space.
Ransomware, which is just one type of cyber threat, is a $2-billion-per-year industry. Firms that don’t account for it will fail hard and fast. Retail banks are the biggest targets for cyber attacks, followed by wholesale financial markets, and then retail investment firms.
Financial firms are attractive to hackers because of the fact that they store lots of valuable and confidential information, tend to have lots of cash on hand (making it more likely that they’ll pay a ransom), and have a very high average cost of downtime. Plus, the average IT security personnel for local banks and small credit unions isn’t usually equipped to handle these incidents.
Address cyber threats by performing regular backups, strengthening encryption, and educating your entire team about security. It also helps to hire more talented IT and cybersecurity professionals and install proven security products.
Mobile Payment Processing and Cloud Security
If you’re still processing your own debit, credit, and ATM transactions, you need to evolve your plan and offload some of this risk/security burden. The majority of banks and credit unions now rely on third-party processors that have cooperative agreements with MasterCard and Visa to process their transactions. And because these vendors operate in the cloud, they provide you with greater security and scalability.
The moral of the story is this: If you can pay someone to handle part of your security strategy, you should. The upfront cost will be more expensive, but in terms of neutralizing or avoiding potential cloud security disasters, it’s a minuscule expense.
This is a good rule of thumb to operate under for every area of your business. Even if something increases your short-term costs, it should be weighed against the long-term financial ramifications. This sort of visionary thinking is what separates so many average businesses from the organizations that thrive decade after decade.
Moving to the cloud is an obvious choice. But if you’re going to invest in cloud computing and partner with a cloud service provider, you need to be thoughtful in how you handle this new environment.
The biggest advantage of using the cloud may also be one of the biggest risks (when not handled properly). When you work with a cloud provider, you get access to upgraded servers, better hardware, updates, and constant improvement. However, if you don’t update to the latest versions, you could end up with a bunch of legacy features and apps. This is known as cloud sprawl.
Cloud sprawl creates a bunch of highly vulnerable endpoints that could end up compromising your business. Cloud service providers no longer emphasize security for older versions. If you want to get maximum security and avoid being target practice for hackers, you’ll need to communicate with your service provider and create a crystal clear game plan that ensures you have constant access to the latest versions and features.
Do You Have a Cloud Game Plan?
It’s not enough to know about the cloud – you have to understand the cloud and embrace it. And that means recognizing the need for cloud security facts and developing a superior strategy that amplifies the upside while mitigating downside risk. Hopefully this article gives your business a strong starting point. Because once you get cloud security under control, your options for growth and development are virtually limitless.