In the wake of the recent economic downturn, federal regulators are increasingly bearing down on financial institutions to improve their data security and management practices. And while this is likely to benefit the economy as a whole, it has become something of a burden for the financial industry.
According to a recent report by Forrester Consulting and Bloomberg Vault, the costs and risks of dealing with regulatory compliance as well as eDiscovery requirements have led many financial institutions to turn to cloud computing solutions.
"The market has reached a tipping point," said Bloomberg Vault global business manager Harald Collet. "We expect to see a significant adoption of cloud‐based message archiving by financial services enterprises of all sizes over the next two years."
The study found that cost of meeting regulatory demands, such as the Dodd-Frank Act, is a major driver to the cloud. In fact, in a survey of 187 financial firm executives, more than 60 percent indicated that the cloud provided lower cost of ownership, as well as simplified management and faster deployments than most on-premise solutions.
The only compliance challenge that proved more important to financial firms than cost are concerns about reputation damage. Given the bad press many financial firms received during the recession, it is understandable that many businesses and consumers are skeptical. Therefore, it is apparent why financial firms may want to be sure their compliance practices portray them in a favorable light.
Forrester and Bloomberg's findings seem to be supported by a separate report by American Bank Systems and Bankers Online, which revealed that many banks consider technology a key part of achieving regulatory compliance and risk management. According to the study, which surveyed 124 compliance officers, 84 percent of respondents indicated some level of satisfaction with their computer-based compliance monitoring system.