Rising compliance costs threaten cloud savings for banks

Southeast Asia’s cloud adoption grows, but rising compliance costs may negate savings, especially for smaller firms.

Financial institutions are scaling their cloud adoption, but compliance costs are climbing too, potentially offsetting the savings gained from cloud infrastructure. This has raised concerns for smaller firms, which may struggle to manage both cloud and compliance costs.

Suraj Ashoka, Senior Research Analyst at Mordor Intelligence, said, “The major issues that we currently find in this industry are the regulatory complexities, as well as the security and compliance risks,” Ashoka explained.

Banks operating across multiple geographies must adhere to varying regulatory norms, making cloud adoption agile but also requiring strict compliance with each region’s regulations. Ashoka noted that while cloud adoption provides scalability and flexibility, it also introduces challenges related to data protection, which must be prioritised to safeguard client information.

“There’s increasing regulations that pertain to resiliency and recovery from adverse events and from data residency or sovereignty,” Sonny Singh, Executive Vice President and General Manager at Oracle Financial Services, mentioned. These challenges are not unique to large financial institutions, as smaller players face similar hurdles. “If you have the right technology partner, you can participate in helping you decrease some of the challenges associated with the cost,” he added.

Ashoka explained that smaller banks are leveraging public cloud services to avoid significant upfront investments in infrastructure. Additionally, smaller banks are targeting niche market segments and offering customised solutions that give them an edge over larger institutions.

Singh highlighted how cloud adoption democratises access to leading infrastructure and applications, enabling institutions of all sizes to leverage advanced technologies. However, he also pointed out that the increasing costs of AI, which is becoming a critical part of cloud infrastructure, can be a significant barrier.

Ashoka recommended adopting predictable cost structures, utilising AI tools to monitor and optimise cloud costs. “Banks are adopting hybrid cloud models, deciding which data should be stored on-premises and which should be moved to the cloud,” he explained.