As our industry wrestled with ‘the cloud’ in a recent FFIEC announcement, one of the largest parts of the financial industry has announced FinQloud with the specific intent of meeting regulatory compliance needs.

FinQloud has been launched by NASDAQ in partnership with Amazon Web Services or AWS, the cloud platform from Amazon the on-line retailer.  According to NASDAQ, FinQloud:

is a secure, cloud computing platform designed exclusively for and accessible by the financial services sector. FinQloud combines AWS’ cloud computing expertise with enhanced security from NASDAQ OMX to provide cost-effective and efficient management and storage of financial data mandated by regulation.

This is very interesting because NASDAQ’s approach really represents a bellweather for some larger trends for the banking industry. As requirements for data retention, mining and patterning in the regulatory arena grow, the demands on data storage and analysis grow at a corresponding rate. To meet these demands economically, there have been major dynamics that have facilitated the best available alternative in the form of AWS.

A simple illustration of this is at the data level. As the need to maintain data (and versions) grows it consumes a great deal of storage. If we think the old way, we may end up looking to a storage vendor like EMC, HP or IBM. These are reliable, high quality storage vendors, but the quality comes at a steep price. The price is in the form of acquisition, maintanance and growth.

With most storage systems you have to buy storage by the Terabyte or more. This model represents the most expensive bits from a storage viewpoint. They’re the Mercedes-Benz of storage. On the flip side, the cloud vendors have rethought the issue and use cheap storage, redundantly. Typically storing a given file four times across multiple data centers with an intelligent software layer to manage it. This pushes the cost down by 75%, while driving availablity up. This is a powerful way to change the cost of compliance.

The other side of the issue is on the analytics side, which is all about computational resources to look at the data that’s stored. As the data grows, either the number of computers needed to get the job done grows, or the time to do it grows. All of these items are, to use a popular cloud term, elastic. This forces financial institutions to keep investing more and more into this area to satisfy regulations – increasing their non-interest expense.

NASDAQ, and others, are realizing that buying that capacity by the drink from massively scaled data centers like Amazon is a far more economic solution to these regulatory demands. This allows organizations, like a major mutual fund, to use the cloud for huge jobs like month-end calculations and purchase the server capacity they need for the hours it is needed. This example eliminated the need for a major tech refresh, while collapsing the costs. All of this makes for a very compelling business proposition.

What about the security issues, you might ask?  As moves like NASDAQ and other major companies represent, Amazon has taken all of the precautions needed and exhibits a state of the art security posture. Having spent the last decade building a security-in-the-cloud company, I’ve been incredibly impressed with their rigor, thoroughness and execution.  The confidence of NASDAQ should sound an ‘all safe’ bell for the industry to move to a more efficient, secure and economic future in the cloud.