As banking customers’ expectations for digital experiences rise and fintech competition grows, the cloud has become essential to staying relevant. But in the rush to modernize, many banks are overlooking a growing risk: cloud concentration, write Vikrant Rai and Graham Tasman. <\/p>\n
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Banking’s relationship with cloud computing<\/a> has shifted dramatically. What started as cautious experimentation has evolved to full-scale dependence. Cloud platforms now support everything from customer onboarding to transaction processing. As banking customers’ expectations for digital experiences rise and fintech competition grows, the cloud has become essential to staying relevant.<\/p>\n But in the rush to modernize, many banks are overlooking a growing risk: cloud concentration. The vast majority of cloud services are controlled by<\/a> just a few providers \u2014 also known as hyperscalers \u2014 such as Amazon, Microsoft and Google. And many banks have gone all-in \u2014 or largely associated critical services \u2014 with a single provider.<\/p>\n That’s a problem. It means that critical operations \u2014 from payments to lending to customer interactions \u2014 are now deeply tied to third-party platforms that banks don’t own, don’t fully control and can’t easily switch away from due to various reasons such as a vendor lock-in. In trying to solve the risks of outdated internal systems and the constant need for services, upgrades and maintenance, banks have largely traded them for a new kind of dependency that may be even more challenging to manage.<\/p>\n We’ve already seen how a cloud outage can ripple through the financial system. In December 2021, an AWS disruption impacted banking services nationwide. In 2023, Microsoft’s cloud failure affected institutions around the world. And in July 2024, the CrowdStrike<\/a> update malfunction brought operations at some of the largest banks to a halt. These events weren’t just IT issues \u2014 they were business continuity failures and reminders of just how dependent banking-related services had become, having a direct impact on customers and even the economy.<\/p>\n While major cloud service providers offer better security than any single bank could achieve, the key risk here isn’t about IT or cybersecurity controls \u2014 it’s about concentration. When critical financial infrastructure is consolidated among just a few service providers, any disruption can cascade through the entire sector and the financial ecosystem.<\/p>\n