Cloud computing is a strategy that financial services firms need to get right
February 04, 2025
Whether your business makes money move, stores and secures it at rest, or puts it to work, advancements in technology can help you do it better. And to keep your digital transformation on track and benefit most from innovation, you really need to consider moving your operations to the cloud. So, what’s stopping you?
Opportunities to innovate
Across the financial services industry, opinions on moving to cloud computing are shifting, according to the 2024 FIS Global Innovation Research. Although concerns linger about the cloud’s security, there is also considerable optimism about its potential to transform operations for the better.
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% But another 37% are optimistic about the value that cloud and edge computing can bring to their businesses, while more than a quarter (26%) believe that embracing cloud computing will have a major impact on their business operations.1
Cloud computing has been around for more than a decade now, and over that time, the scale and agility the cloud offers have come to outweigh the perceived risks for banks and capital markets firms alike.
Not only have hyperscale public cloud providers done a good job of mitigating cybersecurity and other operational risks, but the cloud itself has also proved to be the preferred setting for introducing innovative technologies and major efficiencies to financial operations.
Artificial intelligence (AI) tools, which make heavy demands on compute power, need the cloud’s unrivalled scale to run effectively. In the cloud, they can fulfill their considerable potential for accelerating business processes, gathering and analyzing data, detecting fraud and hyperpersonalizing the banking experience
Ultimately, the financial services industry has come to see the cloud as less of a chance to reduce costs and more of an opportunity to drive innovation. Cloud computing typically gives firms more freedom to configure and adapt their technology, and experiment with more computational power without significant capital investment in nonrefundable hardware.
The cloud’s greater agility and scalability means you can rent the space for a new use case and return it if that use case fails.
So, if you want to keep testing new ideas, advancing your operations and getting ahead of your competitors, you need a cloud-first mentality.
Barriers to change
There yet remains a widespread hesitancy on the part of banks and other financial institutions to move their operations entirely to the cloud. Understandably so: Cloud migration isn’t just a change of technology, it’s a wholesale transformation.
Not all legacy or homegrown solutions will move easily or run naturally in the cloud or be able to take advantage of the extra computational power that a cloud environment offers. So, their architecture may need considerable modernization before migration, which takes time and money.
In the long run, it may be easier and more cost-effective to switch to a cloud-native application from a third-party provider that builds technology for the cloud.
While some firms have committed wholeheartedly to cloud operations, others are migrating at a slower pace, mindful of the risks.
In organizations that currently use core processing technologies, such as a core banking system, around 80% of leaders put strategies in place to manage the risks of migrating to the cloud. While 41% have a detailed comprehensive risk management plan, 39% use a hybrid cloud model, which runs applications in a combination of different public and private cloud environments and captive and private data centers.1
Above all, firms want to know they have control in the cloud, of new technologies like AI, of where their data lives and who can access it, of their processes and of their costs.
Certainly, it’s important to understand what the cloud will cost you, especially as you advance your use cases and use more computational power. A predictable cost structure and a disciplined approach to cloud consumption could help prevent the overhead costs from piling up while likely enabling you to dynamically scale your operations.
Whether your costs go up or down, you’ll likely be changing the way you spend on IT, moving from capital expenditure to operational expenditure.
Strategies for financial firms facing rising costs
From competition to regulation, inflation and outdated business models, firms are facing increasing costs on all sides. Andres Choussy, EVP, Group President, Asset and Trading Services, FIS, talks about strategies that can help you get ahead of these issues.
Resilience to risk
Around the world, and especially in Europe and the U.S., regulators are increasingly looking for banks and financial institutions to ensure resilience, whether to protect against cyberattacks, internal technology glitches or other causes of business interruption.
With billions invested by the hyperscalers in its security, stability and power, the cloud comes with resilience and performance built in. Cloud environments are strong enough to almost never fail and scalable enough to recover quickly should anything go wrong and disrupt money in motion, at rest or at work.
That’s good news for businesses, like banks, that increasingly process transactions around the clock.
When they migrate to the cloud, 81% of organizational leaders that use core processing technologies put disaster recovery capabilities at the top of their technology wishlist, above scalability, cloud-native capabilities and real-time reporting. 1
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% A hybrid cloud approach could further enhance your resilience. If one environment fails, you can quickly switch to an alternative to keep processes running in what is known as a “bare metal recovery.”
Meanwhile, edge computing – another distributed computing model that allows you to process data in remote locations rather than centrally – helps improve connectivity in multicloud deployments and helps reduce reliance on one computing environment or cloud provider.
Hybrid cloud and edge computing approaches also allow you to meet the varying needs of your organization more cost-effectively. Running, say, AI applications in a high-performance cloud but routine processes in a less powerful and less expensive local environment could help mitigate costs.
Insights to share
Another major advantage of the cloud is improved access to data. When a group of applications are run and connected in the cloud, all the data they process is in one place. That’s especially useful when you need real-time data, such as for real-time trading.
At the same time, data sharing technology keeps advancing. If you move your data and reporting infrastructure to the public cloud, a cloud-based data platform will allow other authorized users to access that data without logging into your systems or moving the data.
Moving data is expensive. Now, a firm can migrate its data and reporting systems to the cloud and retain all the benefits of the on-premise infrastructure it has taken years to build and develop. Nothing is lost or even reworked; your data is just accessible from a different location.
But is that data also well protected? This is a priority for financial services firms. However, open, generative AI applications essentially send data into the public domain.
Generative AI, though, can bring transformative capabilities to financial services firms and help them radically improve productivity and insight.
To advance their own AI strategies, more organizations will likely need to build their own large language model capabilities that run in the cloud but keep the data safe from the rest of the world.
Partners to trust
Technology partnerships are essential to unlocking the full potential of cloud computing for the financial services industry.
Hyperscalers offer high-quality cloud computing technology with infrastructure that provides the highest levels of resilience, security, power and scalability. They tend to invest far more in that infrastructure than any individual client or technology partner ever could. When it comes to the cloud, they are operating at a different level.
But to make the cloud work for financial institutions and capital markets firms, you also need expertise in the financial services industry, the regulatory landscape that surrounds it and knowledge of its nuances.
In other words, the cloud by itself won’t miraculously become a core banking platform, payment gateway, securities processing suite or large language model. It takes a financial technology specialist to provide the intellectual property of its solutions, know which cloud strategy suits those solutions and its clients best, and navigate complex regulatory and data sovereignty requirements.
Working together, hyperscale cloud providers and financial technology companies can meet their clients’ needs head-on with powerful software that runs optimally and safely in the cloud. They trust one another and, as a partnership, are winning the trust of the market.
Time to strategize
After its decade or so of ever-increasing prevalence, cloud computing is no longer a trend: It’s a strategy that financial services firms need to get right.
Whether your organization aims to improve the customer experience, reduce costs or enhance resiliency, it is important to align your cloud strategy with your business objectives and make that strategy an integral part of your digital transformation.
1FIS, Global Innovation Research 2024 surveyed 2,000 firms across financial services and other industries in the U.S, U.K., Singapore, Hong Kong and Australia.
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