The UK financial regulators growing concerns that an outage or hack of cloud computing providers could disrupt the banking system isn’t without reason.
The Prudential Regulation Authority (PRA) aims to increase the scrutiny and access more data from cloud giants Amazon, Microsoft, and Google in response to the banking system’s overreliance on them, the Financial Times reported.
We witnessed multiple outages in 2021. It has triggered apprehensions for the PRA regarding the effects of these outages and cyberattacks on the vast amount of data the financial firms transfer to the cloud providers.
To understand the magnitude of this scrutiny, we need to look a the outages that crippled services last year. For example, in December, we reported a major outage of Amazon Web Services (AWS), which affected online banking apps, gaming, or streaming services, among other services. It was yet another episode to highlight the problems of centralised cloud computing. Prior to this, in July, online banking services – including Barclays, TSB, the Bank of Scotland, Tesco Bank, and Sainsbury’s Bank – were fully or partially inaccessible for a short period of time due to a widespread outage.
In July 2021, the Bank of England asked regulators to act on ‘secretive’ cloud computing services to prevent the banking industry’s dependency on a handful of cloud computing providers from becoming a threat to financial stability.
Their concerns were two-pronged – concentrated monopoly and data privacy. First, the Bank of England worried that big providers could dictate terms and conditions to key financial bodies, thereby asserting their monopoly. Second, regarding data privacy, the BoE said that although it understands the cloud providers’ intent behind not revealing much information about their operations to avert cyberattacks, they certainly need to furnish more information to regulators and customers.
Financial sectors’ growing reliance on cloud computing
The trend of banks and other financial institutions outsourcing their crucial offerings to cloud computing companies like Amazon, Microsoft, Google expediated as the pandemic unfolded in 2020.
Leading banks in the UK began working with the key cloud providers to minimise friction with modern infrastructure. Cloud providers offer financial institutions a way out of heavy investments to store, manage and process data.
Banks couldn’t ignore the merits of transitioning to the cloud in recent years as it came with advantages like data and analytics, customer-centric products and services at a lower cost in real-time, reduced risk, data encryption, and keeping a tab on financial crimes.
Although the cloud computing technology addressed the banking industry’s ever-growing data needs, the BoE’s Financial Policy Committee was open about their concerns. In a meeting from September 2021, it noted: ‘the increasing criticality of the services that [cloud service providers] provided to UK financial firms, and the fact that the provision of these services was often concentrated in a small number of third parties, which were very difficult to substitute, posed a threat to UK financial stability in the absence of greater direct regulatory oversight.’
But would the PRA be able to reduce the banking industry’s dependency on cloud conglomerates? Or should they look at diversifying their alternatives?
How decentralised cloud computing resolves the dilemma
The mobility and flexibility of cloud computing technology for the banking industry are undeniable. But computational capacity, data privacy, and costs will continue to plague the centralised cloud giants.
Learn more: ☁️ Cloud computing market to grow 5x by 2030 🚀
In the interest of their consumers, financial firms should distribute their cloud subscriptions across multiple service providers to avoid the risk of their services shutting down during an outage. Alternatively, they need to break away from the shackles of centralised cloud providers and explore decentralised cloud models.
Cloud computing solutions like the Cudos network offer transparency and near-limitless computational capacity at a fraction of the cost. The number of concurrent devices at any time on the Cudos network exceeds 50,000, and the total computing power exceeds 50 trillion floating-point operations. It is supported by the existing hardware computing power monetisation software Cudo Miner, with more than 500,000 registered users (hardware providers) spread across 145 countries worldwide, including blockchain users, gamers, and cloud service providers.
The distribution of nodes on a decentralised network ensures that the effects of outages are not as widespread. Furthermore, as Cudos utilises computing resources from a range of devices distributed globally, the ramifications of an interruption are limited.
Centralised cloud networks often face infrastructure limitations and can only deliver the best performance in a limited number of locations/countries. Being decentralised, Cudos can scale across hundreds of thousands of service providers, all with the resilience of thousands of different networks. Our well-designed network of nodes is equipped to run across the globe in over 150 countries, providing the lowest latency and highest speed network performance.
Be part of our sustainable, decentralised cloud computing solution by becoming our partner! Please contact us today if you are a data centre and cloud service provider.
The Cudos network is gearing up to launch its mainnet in February. Read our latest blog to know our roadmap.
Cudos is powering the metaverse bringing together DeFi, NFTs and gaming experiences to realise the vision of a decentralised Web 3.0, enabling all users to benefit from the growth of the network. We’re an interoperable, open platform launchpad that will provide the infrastructure required to meet the 1000x higher computing needs for the creation of fully immersive, gamified digital realities. Cudos is a Layer 1 blockchain and Layer 2 community-governed compute network, designed to ensure decentralised, permissionless access to high-performance computing at scale. Our native utility token CUDOS is the lifeblood of our network and offers an attractive annual yield and liquidity for stakers and holders.