BANKING IS DATA - The future of data storage in clouds and on-premises

In an increasingly digitalized world, the financial sector faces the challenge of storing immense amounts of sensitive data efficiently and securely. The choice between cloud-based solutions and traditional on-premises systems is becoming a key strategic consideration for banks.

This article examines the evolving landscape of data storage and takes a look at the future of cloud and on-premises solutions in the banking industry.

The current status quo: clouds and on-premises in banks

Some banks use a mixture of cloud and on-premises storage solutions. On-premises offers the advantage of in-house control and therefore possibly a feeling of greater security, while cloud storage promises scalability and flexibility. A hybrid solution should make it possible to utilize the advantages of both approaches.

The rising dominance of the cloud:

Advocates of the cloud see the following advantages in particular:

• Scalability: The cloud enables banks to scale their storage resources as required.
• Cost savings: By outsourcing infrastructure, banks can reduce costs and use their resources more efficiently.
• Innovation: Cloud platforms offer advanced tools for data analysis and AI that drive innovation in the financial sector.

At the same time, banks have to consider various challenges and, in particular, security aspects when switching to cloud solutions:

• Data security: although cloud providers implement strict security measures, security concerns remain a key issue.
• Regulatory compliance: Banks must ensure that their data complies with regulatory requirements, especially in cloud environments. This includes the following:
• Contract negotiations: When selecting a cloud provider, banks must ensure that the service level agreements (SLAs) cover all regulatory requirements. These must also include data protection, data ownership and compliance controls.
• GDPR: An important provision in the GDPR concerns the transfer of personal data outside the European Union (EU). According to the GDPR, personal data may only be transferred to countries that offer an adequate level of data protection. The transfer of data to countries outside the EU is generally only permitted if certain conditions are met. It is important to note that the GDPR imposes strict requirements on the processing of personal data, regardless of whether the data is processed inside or outside the EU. Organizations that process personal data must ensure that they comply with the principles of the GDPR, such as lawfulness, transparency, purpose limitation and data minimization.

The outsourcing of services, including cloud services, by banks is subject to specific regulatory requirements:

• Outsourcing: If a bank outsources services, this must in most cases be regarded as "outsourcing". This includes the use of cloud services where data and processes are outside the direct control of the bank.
• Approval requirement: In some jurisdictions, the outsourcing of services by banks is subject to approval. This means that banks must obtain approval from supervisory authorities before using cloud services or other outsourcing.
• Control requirements: When approving outsourcing, supervisory authorities often attach importance to banks retaining full control over their business activities. This also applies to responsibility for compliance with all legal and regulatory requirements, particularly in the area of data protection and information security.
• Contractual regulations: When using cloud services, it is therefore essential to make contractual arrangements with the cloud provider to ensure that the requirements of the supervisory authorities are met. These include security standards, compliance checks, audit options and clear agreements on data control.
• Risk management: Banks must implement comprehensive risk management for outsourcing, including careful risk assessment and monitoring. This includes the identification and assessment of potential risks associated with the use of cloud services.
• Dependence: there is a risk of excessive dependence on the cloud provider. This can lead to a weak negotiating position at the time of contract renewal and jeopardize the cost advantage in the long term.

On-premises: The role of traditional data storage:

Representatives of on-premises solutions see the following advantages in particular:

• Absolute control: On-premises solutions offer banks direct control over their data and infrastructure.
• Security requirements: In strictly regulated environments where security is a top priority, on-premises may be preferred. However, this means that high and continuous investments are made in the company's own data centers.

What are the challenges and are there any limitations?

• Costs: On-premises requires considerable investment in hardware and maintenance.
• Scalability limitation: Scalability can be a challenge when demand for storage resources fluctuates greatly.

Focus on the future: hybrid and multi-cloud approaches:

In order to combine as many advantages of both solutions as possible, so-called hybrid cloud models are being pursued.

In particular, the aim is to combine the control of on-premises with the scalability of the cloud solution. Specifically, care is taken to store highly sensitive data locally and to store certain applications that are considered less critical in the cloud.

An alternative approach is to pursue multi-cloud strategies. By using multiple cloud providers, banks minimize the risk of dependency on a single provider (verndor lock-in). Multi-cloud approaches make it possible to select the best platform for different requirements.

Conclusion: Finding the right balance

The future of data storage for banks lies in the art of finding the right balance between control, scalability and innovation. Hybrid and multi-cloud approaches are expected to grow in importance as they offer banks the flexibility to adapt their data storage strategies to changing requirements. Regardless of this choice, banks must continue to invest in robust security measures and strict compliance protocols.

The effective storage and management of data is a decisive advantage in competition between banks. Therefore, the future of data storage in banks is not only a technological issue, but also a strategic consideration for success in an increasingly digital financial world.

In view of the challenges outlined above, CURENTIS is working on advisory and conceptual solutions and actively supports clients in this complex area.