Banking has woken up to the public cloud risk. Has telecom?

Last year's sequence of Big Tech outages offered a glimpse of the Internet apocalypse – a sneak preview of a Mad Max planet where cloud-dependent economies have toppled and the cash in your pocket is only good for wiping your nose or showing children what Churchill looked like. It's not far off this now. Visit most pubs in central London, as your correspondent occasionally does after a day's laboring over the keyboard, and you will find that your banknotes are about as useful as Monopoly money. You can thank the pandemic for that, along with our Big Tech vassalage.

People obviously haven't been reading The Handmaid's Tale, where a military dictatorship in a cashless American society seizes control of electronic payment systems and stops women from using them. Kudos to feminist author Margaret Atwood for not only envisaging the death of cash nearly four decades before it happened (the novel was published in 1985), but also for imagining just how dystopian it could be. Pre-apocalypse, cash in the hand is a symbol of liberation. An electronic payment is servitude of one form or another.

Even worse would be to entrust the world’s financial systems to a handful of Big Tech companies, and yet this is precisely what is happening. The Bank for International Settlements (BIS), established and owned by many of the world’s central bank authorities, is sufficiently alarmed to have just published a white paper entitled “Big tech interdependencies – a key policy blind spot.” No prizes for guessing where the authors stand on this issue.

Related:Bank of England Warns on Risks of Banking’s Reliance on Cloud Computing

Among their concerns is that banks and other financial institutions have become overly reliant on cloud computing services provided by a few tech giants. A survey commissioned by Google Cloud, and cited in the BIS report, found that 83% of respondents already use some form of public cloud.

“The market for cloud computing services is highly concentrated,” the authors write, pointing out that AWS, Microsoft Azure, Google Cloud and Alibaba Cloud have a market share of 70% across all sectors.

Systemic threats

The nightmare scenario is that one of these clouds suffers an outage that lasts more than just a few hours, or even collapses. The risks are hardly diminishing. You can guarantee that Russian hackers courting Vladimir Putin’s approval are firing off code written to cripple important US companies. The 2008 financial crisis showed how dangerous it is to assume that some organizations are too big to fail.

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