Building a cloud-based financial app with regulatory compliance

Building a cloud-based financial app with regulatory compliance

Financial institutions recognize the advantages of migrating apps to the cloud or adopting a multicloud approach. While modern technologies offer tremendous opportunities, they also present challenges related to safeguarding customer data, cybersecurity, and complying with the law in the strictly regulated finance sector. How can you create a cloud-based FinTech app and ensure its compliance with industry regulations?

In this article, we present insights from FINGO experts – a Polish software house specializing FinTech cloud migration strategy and offering ready-made cloud solutions for the obligatory reporting trusted by financial institutions. They share their knowledge of how to unlock the potential of cloud technology while meeting legal requirements in software solutions.

Safety first – a zero-tolerance approach to errors

Adopting a zero-tolerance approach to errors is paramount when developing a financial cloud application. Ensuring security for artifacts (apps, configuration files, licenses, etc.) and procedures is critical to this process. Implementing rigorous security measures reduces the risk of data breaches and potential leaks. Maintaining the integrity of the application is crucial, as any breach can have dire consequences, leading to a loss of trust and a tarnished reputation for the company in the market.

The activities of all financial institutions the world over have been based on trust since they were founded. The client has always had to trust such an organization to place their money there. Therefore, the reputation of "we are safe and secure" is much more important in their case than it is in other businesses.

This desire translates directly into the key principle of providing SaaS services to financial clients: there is no place for leaks or security crises. The client may accept temporary unavailability of services because of a global, continental or national failure, but will not accept compromises in terms of security – states Bartłomiej Knapik, Release & Platform Manager at FINGO.

To ensure security in a cloud-based financial application, focus on the following: 

  • Data Encryption: Encrypt sensitive data during transmission and storage to prevent unauthorized access;
  • Secure APIs: Ensure APIs are protected against potential exploits and misuse;
  • Patch Management: Regularly update software and applications to fix known vulnerabilities;
  • Access Controls: Implement robust authentication mechanisms and role-based access to limit access to sensitive features and data;
  • Monitoring and Logging: Monitor application activity and maintain detailed logs to promptly detect and respond to suspicious behavior;
  • Third-Party Risks: Assess and monitor security practices of third-party providers and integrations;
  • Disaster Recovery: Implement robust backup and recovery procedures to prevent data loss in case of a security incident; and
  • Employee Training: Train staff to recognize and prevent security threats to maintain a secure environment.

Knowledge of applicable laws and full involvement of project teams

Building cloud-based financial software in adherence to industry laws and regulations is paramount. The European financial sector is subject to various regulations, and their application depends on the type of business conducted. For instance, companies not offering investment services in the cryptocurrency market need not adhere to MiCA regulations.

What is more, different European countries require adapting to EU regulations while considering local market nuances. Each country may customize these regulations to suit their specific needs. For instance, Poland has additional regulations.

The UK stands out for its proactive approach to utilizing cloud services. The implementation of the G-Cloud initiative in 2012 and the partnership with cloud service providers catapulted the United Kingdom to a prominent position in the realm of data center infrastructure, securing the second spot across Europe and claiming the third position worldwide.

Within that, collaboration with the legal and compliance department and cybersecurity experts is essential during the creation (or the adaptation to the local market's requirements) of financial cloud-based applications. Compliance experts and lawyers should work closely with the development team, project managers, cybersecurity and infrastructure experts, and other employees. This cooperation ensures a thorough understanding of applicable laws and helps implement digital solutions that comply with industry requirements.

From my point of view, the awareness and knowledge of people involved in software development play a key role in the protection process. The pillar of our actions must be living policies and procedures that are created and constantly improved by us and for us. That's why it was so important to me that everyone was involved, directly or indirectly, in creating our FINGO procedures and policies.

This approach ensures that teams will have a sense of self-agency and control. It also allows you to better understand the meaning of the solutions being created and constantly increases the sense of responsibility for the processes. As an Information Compliance Officer, I saw no point in creating policies only for them to gather dust. Therefore, on the legal framework, which was our starting point, we carried out further activities together as Team FINGO. Of course, this does not mean that everyone was forced to be part of the Security & Compliance Project Team, but everyone could submit their comments and give us ideas at their Guild meetings or on the FINGO forum – states Brzozowska Kinga, Information Compliance Officer at FINGO.

The role of the legal and compliance team includes:

  • analyzing laws and regulations;
  • identifying risks and potential threats;
  • co-creating policies and procedures;
  • monitoring regulatory changes; and
  • providing staff training.

Choosing a cloud service provider

Selecting the proper cloud service provider is crucial for building secure and efficient modern financial applications. Several factors should be considered, such as the location of data centers, compliance certifications, the provider's experience in the financial sector, and practical compliance audit mechanisms.

The financial sector is highly regulated, and so many factors can increase the risk of non-compliance. One such factor is the storage and processing of data outside the country. Therefore, when choosing an offer, financial institutions must primarily be guided by the assessment of risks.

When we were creating eON – a cloud application for obligatory reporting, we chose Google Cloud. This cloud solution vendor has a data center in Poland, which minimizes the compliance risks referred to by Polish law. At the same time, in emergencies or our expansion into foreign markets, the global availability of Google's data center allows us to easily move our application to another location in Europe – says Piotr Malczak, Co-owner and CPO at FINGO.

Data security and user privacy protection are paramount for financial applications, especially as cyberattacks on cloud-based networks increase. However, from a business point of view, the biggest challenge in choosing a cloud provider is to strike a balance between ensuring security and cost.

Costs may vary depending on the model of cloud services (e.g., SaaS, PaaS, IaaS) and the company's individual needs. Costs associated with the use of cloud services can include, e.g., charges for resources, data storage, data transfer, scaling, technical support, and, of course, the level of security. 

A trustworthy cloud partner

Building a cloud-based financial application with regulatory compliance is challenging. The choice of a cloud provider is complex, as it must encompass complete cybersecurity, legal compliance, and cost considerations.

Therefore, partnering with experienced software houses like FINGO, which specializes in cloud solutions for heavily regulated financial markets, becomes imperative. Their expertise ensures a robust and secure infrastructure, safeguarding against cyber threats and meeting all legal requirements.

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