Hello, Lykkers! Not long ago, banking ran on mainframes—massive, expensive machines locked in data centres, maintained with the kind of care usually reserved for museum artefacts. Those systems still exist, but they are rapidly being replaced by something far more flexible: cloud computing.

From the world's largest banks to nimble fintech startups, the cloud is reshaping how financial institutions store data, manage risk, and serve customers. The shift is not just about saving money—it is about survival.

Why Banks Are Moving to the Cloud

The numbers tell a clear story. According to LSEG research, 87% of financial services firms have increased their cloud spending in the past two years.

But the motivation has shifted. While cost reduction once dominated the conversation, banks are now prioritising scalability, agility, and AI enablement. The pressure to move is mounting from several directions. Legacy systems are expensive to maintain, and they can make regulatory compliance more complex and costly than for cloud-native competitors. Data volumes are exploding, and customers expect 24/7 access to personalised services. Meanwhile, fintech competitors are launching features in days rather than months. Cloud infrastructure provides the flexibility banks need to keep pace.

From Legacy to Cloud: The Migration Challenge

Migrating a bank's core systems to the cloud is no small undertaking. Italy's largest bank, Intesa Sanpaolo, recently completed a major shift of its core IT systems to Google Cloud technology—a multi-billion-euro project that moved over 800 applications and decommissioned an equal number. The bank joins a select group of European institutions, including Lloyds, HSBC, and Santander, that have pursued large-scale cloud migration.

But the transition is not always smooth. Bernard Gavgani, former Chief Information Officer of BNP Paribas, has pointed out a challenging reality: "The fake news was that cloud will reduce cost." He notes that large banks often end up paying for cloud services while still running their own data centres—carrying both costs simultaneously. The fragility of running legacy and cloud systems side by side is a significant concern.

Today, 82% of firms operate with either a multi-cloud or hybrid-cloud strategy, aiming to balance flexibility with risk diversification. However, banks are more likely to favour hybrid-cloud strategies than multi-cloud approaches, which can still leave institutions exposed to concentration risk and vendor lock-in.

Security and Regulation: The Non-Negotiables

Security remains a top concern. Nearly half of financial services executives cite the sophistication of cyberattacks as their primary worry. The risks are real—in December 2022 alone, finance and insurance organisations globally suffered 566 breaches, leading to over 254 million leaked records.

Yet the cloud may offer better security than traditional infrastructure. As noted by industry observers, data in the cloud is encrypted and can be more secure than legacy systems, where banks simply secured their perimeters. Cloud providers invest massive resources in security that individual banks cannot match.

Regulatory compliance adds another layer of complexity. Many firms have adjusted their cloud strategies in response to regulatory frameworks like the EU's Digital Operational Resilience Act (DORA) and GDPR. Data sovereignty concerns—where sensitive customer data must remain within specific jurisdictions—create particular challenges for banks operating across borders.

AI and the Cloud: A Powerful Partnership

Perhaps the most transformative development is the convergence of cloud and artificial intelligence. According to LSEG's survey, 91% of firms are either already using or planning to use cloud services for AI initiatives within the next 12 months. Generative AI, fraud detection, and risk management are among the top use cases.

The relationship works both ways: cloud enables AI, and AI drives demand for cloud. Top-performing institutions are already seeing measurable improvements in return on equity while cutting cost-to-income ratios. Fast-tracked AI implementation is delivering significant increases in pre-tax profit.

Final Thoughts

The transformation of banking infrastructure is well underway. Cloud computing is no longer experimental—it is essential. Banks that embrace hybrid and multi-cloud strategies, invest in core modernisation, and integrate AI thoughtfully are gaining competitive advantages. Those that cling to legacy systems risk falling behind in an industry where speed, security, and innovation are everything. The cloud is not just changing how banks store data—it is changing what banks can become.