# The FCA allows financial services firms to use the cloud – but why should they adopt it?
Author:  Pal Sinha, Barnali 
Author URL: https://financedigest.com/author/pal-sinha-barnali
Published: 2016-08-22
Category: TECHNOLOGY
Category URL: https://financedigest.com/category/technology
Meta Title: Cloud-Based IT Solutions for UK Financial Services Firms
Meta Description: Discover how UK financial services firms can now safely utilise cloud-based IT solutions in line with FCA guidelines. Scale up, stay secure, and never miss a
URL: https://financedigest.com/the-fca-allows-financial-services-firms-to-use-the-cloud-but-why-should-they-adopt-ithtml

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**Robert Rutherford**, CEO of the business and technical consultancy [QuoStar](http://www.quostar.com/)

Financial services firms operating in the UK are now able to utilise cloud-based IT solutions without fear of breaking their regulatory obligations, as the FCA has said that there is “no fundamental reason” why firms cannot implement cloud services.

Whilst these are guidelines rather than rules, the FCA has advised firms to take note of them and use them as a basis for their outsourcing strategies. One element of this guidance which bears noting is that firms should ensure that cloud providers store any data relating to their organisation in data centres situated in suitable jurisdictions. In essence, the FCA still needs an oversight of any data relating to [financial services firms](https://www.financedigest.com/financial-firms-can-use-technology-combat-todays-cybercriminals.html "How financial firms can use technology to combat today’s cybercriminals") and as such, advises that a data residency policy must be agreed with the cloud provider before commencing with any storage.

Despite these guidelines now being in place, many firms across the [financial services](https://www.financedigest.com/can-financial-services-brands-ever-be-credible-on-social.html "Can financial services brands ever be credible on social? ") sector are still puzzled as to how the cloud can work for them and for their industry.

**The silver linings of** [cloud computing](https://www.financedigest.com/the-future-of-cloud-computing.html "The Future of Cloud Computing")

The benefits of using cloud solutions for finance-based firms are no different to those in accountancy, law, or even media. The predominant reasons for utilising the [cloud over other IT infrastructures](https://www.financedigest.com/achieving-a-smooth-transition-from-legacy-infrastructure-to-hybrid-cloud.html "Achieving a Smooth Transition from Legacy Infrastructure to Hybrid Cloud") are its flexibility, scalability and availability. In simpler terms, a firm of any size, with any number of employees can use the cloud, and this can be scaled up or scaled [back to fit the future](https://www.financedigest.com/back-in-barcelona-telecoms-bosses-stake-claim-to-digital-future.html "Back in Barcelona, telecoms bosses stake claim to digital future") needs of a firm as it goes through its corporate lifecycle.

[Recent figures from Thomson Reuters have indicated that the level of M&A activity](https://www.financedigest.com/historic-ma-activity-will-peak-in-2022.html) in The City is strong post-Brexit, meaning that firms across a variety of sectors are deciding that now is the time to strategically merge their business, or be acquired by a larger organisation. In these scenarios, some form of private [cloud based IT infrastructure is often a perfect](https://www.financedigest.com/fintech-cloud-computing-a-perfect-match.html "Fintech & Cloud Computing: A Perfect Match") solution. If a firm finds itself suddenly with a far greater number of employees and locations, its [cloud service provider](https://www.financedigest.com/can-companies-minimise-their-dependency-on-cloud-service-providers.html "Can companies minimise their dependency on cloud service providers?") can simply scale up their service to deliver IT to the new team , typically instantly.

Cloud computing also offers a robust solution to prevent the impact on business operations should a server or another IT delivery platform fail. By their very nature, [cloud service providers](https://www.financedigest.com/tech-amigos-provides-unrivalled-aws-cloud-service-support-for-autorama-groups-leading-brand-vanarama-2.html "Tech Amigos provides unrivalled AWS cloud service support for Autorama Group’s leading brand, Vanarama") must be able to transfer data to an alternative platform in case of an outage. The vast majority of cloud providers will allow a firm to dictate where its [data is stored, replicated and backed up, meaning that the FCA’s guidelines regarding jurisdictional data storage](https://www.financedigest.com/data-storage-market-revenue-is-expected-to-increase-at-a-cagr-of-13-6-during-2021-2025.html "Data Storage Market revenue is expected to increase at a CAGR of 13.6% during 2021-2025") will remain adhered do in the event of a server failure.

**Why [security risks are a thing](https://www.financedigest.com/embedded-security-for-internet-of-things-market-2021-by-global-key-players-types-applications-countries-industry-size-and-forecast-to-2027.html "Embedded Security For Internet Of Things Market 2021 by Global Key Players, Types, Applications, Countries, Industry Size and Forecast to 2027") of the past**

The risks posed by cloud computing are not linked to the cloud itself, but rather the [security of a cloud](https://www.financedigest.com/dont-let-the-promises-of-virtual-desktop-security-cloud-your-judgement.html "Don’t let the promises of virtual desktop security cloud your judgement") provider. Security is yet another area where misconceptions linger. Some firms still believe that the cloud is less secure than having their data stored locally, when in fact most data [breaches](https://www.financedigest.com/amazons-twitch-blames-configuration-error-for-data-breach.html "Amazon’s Twitch blames configuration error for data breach") take place in on-site data centres.

As such, firms [must conduct the necessary due-diligence to ensure that a cloud service provider has an appropriate level of security](https://www.financedigest.com/as-saas-grows-financial-services-must-rethink-their-security-approach.html "As SaaS grows, financial services must rethink their security approach") in place to keep their data safe. They must take ultimate responsibility, undertake assessments and apply suitable controls to ensure their data is secure.

There are also a number of security controls which firms can add to a cloud plan to further decrease any levels of risk, but in general terms, the cloud is more secure than running a legacy system internally, which is what a large percentage of the financial [industry currently](https://www.financedigest.com/alpaca-fiber-market-2019-outlook-current-and-future-industry-landscape-analysis-2029.html "Alpaca Fiber Market 2019 Outlook, Current and Future Industry Landscape Analysis 2029") does.

**Specialised solutions**

The needs of the [financial services](https://www.financedigest.com/financial-services-firms-turn-to-big-data-intelligence-to-fight-fraudulent-activity-according-to-xerox-study.html "FINANCIAL SERVICES FIRMS TURN TO BIG DATA INTELLIGENCE TO FIGHT FRAUDULENT ACTIVITY ACCORDING TO XEROX STUDY") sector vary from others due to the level of regulatory compliance which must be heeded by any third-party provider. This is where an ‘off the shelf’ solution will not be suitable for firms in this industry, and where more niche providers can enhance a firm’s [delivery of IT service](https://www.financedigest.com/online-food-delivery-services-market-will-reach-a-valuation-of-over-us-4212-6-mn-towards-2029-end-fmi.html "Online Food Delivery Services Market will Reach a Valuation of over US$ 4,212.6 Mn towards 2029-end: FMI").

By conducting research into the more specialist solutions available, a firm will be able to benefit from a provider which understands its requirements and the [need to ensure that service](https://www.financedigest.com/financial-services-need-a-digital-transformation.html "Financial services need a digital transformation") can be maintained around the clock.

Despite the [clear benefits](https://www.financedigest.com/clearing-out-your-garage-benefiting-from-corporate-simplification-2.html "Clearing Out Your Garage – Benefiting from Corporate Simplification ") on offer, many firms have been reluctant to move to the cloud as they do not understand how it can help their business. The cloud comes in many forms and should not be dismissed [due to a single](https://www.financedigest.com/child-resistant-single-dose-pouches-market-one-the-most-booming-industry-in-upcoming-years-due-to-global-demand-by-2031.html "Child Resistant Single Dose Pouches Market | One the Most Booming Industry in Upcoming Years Due to Global Demand by 2031") all-encompassing name. Along with obvious benefits like greater flexibility, scalability, security and control, the [cloud also allows a firm’s internal IT team to focus on business change projects](https://www.financedigest.com/trend-micro-cloud-one-delivers-projected-roi-of-up-to-188.html "Trend Micro Cloud One Delivers Projected ROI of Up to 188%"), instead of concentrating on the day to day protection and storage of data.As a result, the advantages of using the cloud are clear, and with the FCA giving it the proverbial ‘thumbs up’, [financial services firms](https://www.financedigest.com/turning-a-blind-eye-wont-work-for-financial-firms-as-the-fca-tightens-its-grip.html "TURNING A BLIND EYE WON’T WORK FOR FINANCIAL FIRMS AS THE FCA TIGHTENS ITS GRIP") must consider it as a viable option when considering their infrastructure budgets for the next quarter.


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