The Treasury Department issued a report regarding the benefits and challenges associated with the use of cloud service providers (CSPs) by financial sector firms, finding shortcomings related to transparency, staff support, and cybersecurity incident response.

Cloud computing, as defined in the report, is “a model for enabling ubiquitous, convenient, on-demand network access to a shared pool of configurable computing resources (e.g., networks, servers, storage, applications, and services) that can be rapidly provisioned and released with minimal management effort or CSP interaction.” Service models range from software-as-a-service, platform-as-a-service, or infrastructure-as-a-service, all with varying amounts of control by the financial institution and the CSP.

The benefits of cloud services for the financial services industry are generally accepted. CSPs can provide clients with redundancy for systems that allows for continuity of service in case one portion of the system fails. They can supply scalable resources that enable clients to ramp up or down services quickly and efficiently. They offer security for services provided, although this benefit varies from provider to provider. And they allow clients to forgo the purchase of expensive information technology hardware and equipment.