Millions of payments could be halted in the event of a single power issue. Several European banks on Tuesday had to deal with a few financial services being unavailable due to a Google Cloud issue. There was no loss of money, but a difficult question was raised about who is on the hook when the cloud goes down.
What Happened During the Google Cloud Outage
Google has admitted that the downtime was for several hours. It was a "power event" in a third-party facility on its cloud region, europe-west2, located in London and supporting customers in Europe.
Google announced that its services are back. It also guaranteed an analysis on its public status dashboard.
Which Banks Were Affected
Banks that were impacted include Revolut, Lloyds and HSBC. Lloyds and HSBC did not immediately respond to requests for comment.
Revolut has approximately 13 million customers in the UK. Its web site says it was Tuesday when the following services were impacted:
- Logging in to the app
- Card payments
- Cash withdrawals
Throughout, customer funds and data were kept safe, according to Revolut. It is investigating the matter to minimise the disruption that may be caused by a third party in the future.
European Financial Regulators Ask Questions
European Banking Authority (EBA) has reached out to Google Cloud. The watchdog is seeking further details, wants to understand the implications and will be evaluating the potential impact on financial entities in the EU, a spokesman said.
This is a calculated reaction. Regulators are collecting data, not making judgments.
A First Test for Critical Third-Party Providers
The outage has become the first significant test of new European cloud resilience guidelines for finance. The EU last year identified 19 technology firms as "critical third party providers" to the financial sector. They are directly supervised by three financial regulators for the first time, including the EBA.
Britain took similar steps for four cloud providers. The overlying concern with both the initiatives is the same: If a big supplier goes under, many banks can feel its effects. Google Cloud is under both frameworks.
What UK Authorities Are Doing
Britain's parliament's Treasury Committee has sent a letter to the Bank of England and Financial Conduct Authority (FCA). It wants to know:
- How the regulators responded to Tuesday's outage
- The extent of the disruptions
- If any financial damage was incurred by customers
FCA says it is in discussion with Google. In Britain, a critical third party like Google Cloud has to report serious outages to the FCA and the Bank of England under Britain's critical third party system. A spokesman for the Bank of England was unable to comment.
Who Is Responsible When a Cloud Provider Fails
The UK rules place a duty on banks to provide customer services, whether they rely on third parties. Technology cannot be outsourced, accountability cannot be outsourced.
That's a key concept that is important for customers. Card payment failures and blockage of a logon are serious issues, regardless of whether the failure is due to a bank's own internal systems or another data centre's.
What Customers Can Take From This
Such interruption to service is unusual, but is indicative of the interconnectedness of modern banking. There are a number of helpful tips that can help ease the stress during disruption:
- Have sufficient cash for emergencies
- Have multiple payment options
- Don't assume anything is wrong, contact your bank's official website or status page.
The Bottom Line
Google Cloud continued to experience interruptions, which were resolved within a few hours, while Revolut insists that money and data had not been compromised. The long story has just begun. European and UK regulators are asking questions, Google has assured a public analysis and banks are appraising their reliance on third-party cloud services. The answers will provide insight into the effectiveness of the new rules for critical providers in practice.
