By Jon Lucas, Director and Co-Founder, Hyve Managed Hosting.
While security and compliance have always been crucial pillars of cloud hosting, the landscape is shifting. New legislation and stricter regulatory frameworks are placing heavier demands on businesses – particularly in sectors like financial services – forcing companies to invest more time, and resources into ticking compliance boxes.
A level of compliance is necessary, of course, but is the intense focus starting to hinder digital transformation? Is it becoming a roadblock to innovation? For many businesses, especially SMEs, the burden of meeting complex regulations is so great that it feels like a full-time job in itself, leaving little capacity for developing new services, adopting new technologies or scaling operations.
This is particularly prevalent in the UK. The Data Use and Access Act 2025, for instance, which has recently received Royal Assent, represents the most significant rewrite of UK GDPR, PECR and other related laws since Brexit. For SMEs, including those operating in financial services, it may lead to the need to revisit records of processing, data flows, cookie consent and Data Subject Access Requests. At the same time, small businesses in financial services are actively monitoring what is happening with the nascent Artificial Intelligence (Regulation) Bill.
For UK financial services SMEs, FCA and PRA privacy-adjacent rules also potentially slow innovation by significantly increasing documentation, risk-assessment and regulatory reporting obligations.
This challenge doesn’t stop at national borders either. SMEs must also keep pace with international regulations. The EU is ramping up activity around key digital regulations, including stricter enforcement of GDPR, the Digital Operational Resilience Act (DORA), which sets new requirements for ICT risk management in the financial sector, and the second Network and Information Security (NIS2) Directive, which broadens cybersecurity obligations across critical industries.
While necessary for safeguarding data, these regulations disproportionately affect SMEs, which have fewer resources but face the same compliance standards as large enterprises. The good news: with the right cloud infrastructure and expert partners, SMEs can meet compliance demands without halting innovation or blowing their budgets.
Compliance is getting harder
As compliance regulations continue to grow, SMEs are finding it ever more difficult to keep pace. Across UK financial services, the cost of a data breach could cost millions of pounds once investigation, recovery, customer restitution and regulatory penalties are counted. Few fintech boutiques or credit brokers could absorb a blow of that size.
If SMEs want to survive in today’s evolving compliance climate, compliance can no longer be optional or reactive; it must be built into daily operations.
Choosing Infrastructure that Works for Compliance
Many SMEs are hesitant to upgrade their infrastructure due to concerns about complexity, cost, or compliance risks, but inaction often leads to greater vulnerability.
SMEs can suffer real setbacks because of non-compliant systems, including reputational harm, customer attrition, and financial penalties that could have been avoided. In one recent case, a small business called us for urgent support after failing to apply security patches in a timely manner. This mistake exposed their system to known vulnerabilities that attackers swiftly exploited to disrupt services and compromise data.
However, it’s also crucial that businesses focus on the quality of the data feeding their compliance systems. Even the best infrastructure can struggle if data quality is poor or ingestion processes are cumbersome. SMEs must address these challenges upfront to ensure compliance reporting is both accurate and efficient.
Ultimately, it is crucial that they select the right cloud provider for their compliance needs. In making the choice, they should prioritise built-in technical and security controls (including encryptions, backups, and monitoring), support for data sovereignty and regional compliance needs, and transparent reporting and audit support. They should also ensure they have the ability to deliver a platform that can cleanse, structure, and stream information reliably from day one.
If they do all this correctly, SMEs will reap the rewards. A strong cloud partner acts as a force multiplier: easing the compliance burden, freeing internal teams, and enabling faster innovation and growth.
Turning compliance into a growth strategy
As the cost of compliance continues to outweigh the cost of maintaining outdated or non-compliant infrastructure, it’s time to reframe the conversation. Rather than focusing only on the risks, SMEs need to start seeing compliance as a way of building competitive advantage and a means of driving new opportunities, rather than something that creates more obstacles.
SMEs need to treat compliance not just as risk mitigation, but as a trust signal; one that can unlock growth and positive change.
SMEs that take advantage of leveraging infrastructure and reliable partners to help manage compliance needs gain a competitive advantage in winning deals with larger clients who require stricter data protection, enter new markets more seamlessly where regulations are tighter, and build brand trust faster, which is especially key for new or rapidly scaling businesses.
The days of compromising on development goals to accommodate the large cost and time commitment of compliance adherence are long gone. The best move that financial service SMEs can make today is to view compliance as a business advantage rather than a burden, recognising the function as an essential component of customer focus, reinforcing trust, reliability, and long-term value.
Forming a partnership with a cloud partner that embraces compliance as a core building block for infrastructure and a catalyst for growth will set SMEs up to evolve as rapidly as regulations change.
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