Nadish Lad, Global Head of Product and Strategic Business at Volante Technologies
When cloud computing first arrived at the shores of the banking sector, many expected it would sweep the entire industry. In some ways, this has been true: as of 2023, more than 91% of banks and insurance companies have now initiated their cloud journey. Yet the all-in narrative that dominated early banking discourse has failed to produce its promised reality. Instead, it’s a hybrid cloud approach — combining public cloud, private cloud, and on-premises infrastructure — that has really taken hold. Financial institutions have come to realise that a hybrid cloud approach is the banking sector’s best bet, offering modernisation while mitigating risk and innovation but without sacrificing security.
The cloud “sweet spot” for banks is hybrid
Hybrid cloud architectures have emerged as the pragmatic choice for financial institutions. Volante’s recent Big Survey 2025 found that while only 13% of banks follow a fully cloud-native approach to cloud adoption for payments modernisation, the majority (58%) have adopted a hybrid approach.
The benefits of this choice are manifold. Banks that wish to modernise quickly, but aren’t ready to fully give up control of their infrastructure, find the hybrid cloud allows for fast deployment and scalability, without compromising data governance or compliance. In the heavily regulated environment of finance, maintaining compliance is critical. Not solely for customer safety but to avoid being handed a fine, like Starling, Monzo, and Barclays, that runs to multiple millions. As such, many financial institutions have continued to resist full cloud migration, despite the pressure to modernise rapidly and meet the rising expectations of customers. Hybrid cloud offers banks the best of both worlds: the ability to maintain control over critical processes while embracing the innovation needed to remain competitive.
Setting banks up for the future
The hybrid cloud is uniquely positioned to help banks adapt to new regulations and set them up for success in the future. For instance, the new ISO 20022 messaging standard revolves around the sending of rich data, and data, by its nature, is cloud-independent. A hybrid cloud strategy allows banks to securely access and use this data, wherever it resides, with ISO serving as the common language for translation and deployment.
Real-time and instant payments similarly often require a bridge between non-cloud and cloud environments. Frequently, real-time payment networks allow for full cloud processing, but require the switch to be in a known, secure physical location. A hybrid cloud is the perfect architecture to support this, in its combination of on-premises and cloud environments.
The hybrid cloud not only helps banks meet the demands of incoming regulation, it allows them to step beyond requirements and be at the forefront of financial innovation. A hybrid cloud strategy makes it much easier to incorporate artificial intelligence into operations, as different AI agents and platforms may run on different clouds. Hybrid clouds also have a role to play in helping banks explore the possibilities of stablecoin, which is generating significant industry excitement, due to its potential to solve long-standing problems in cross-currency and cross-border treasury management. Yet to make stablecoin as easy to use as traditional payment rails, frictionless on- and off-ramps are required. This is where the cloud comes in: facilitating the integrations needed for compliance and smooth user experiences, so banks can benefit from pioneering new forms of payment without compromising trust.
Hidden advantages of the hybrid cloud
Furthermore, what was once seen as a flaw in the hybrid cloud model may well turn out to be one of its biggest advantages. The recent Amazon Web Services outage demonstrates the havoc disrupted cloud services can wreak; such dependence on fallible cloud environments was thought to be a drawback of hybrid clouds, as multiple clouds engender multiple failure points. However, a hybrid model may be seen to distribute risk, rather than increase it. If an organisation were to use multiple clouds and one were to experience an outage, they might be able to switch processes to the functional clouds or, at the very least, avoid their entire business operation going down. The hybrid cloud model, then, allows businesses to pursue innovation, while still prioritising business continuity and disaster recovery.
Regional attitudes to cloud adoption
Cloud providers and technology partners must be aware that financial institutions approach cloud migration with varying concerns. There is no one-size-fits-all approach and vendors should appreciate regional nuances and tailor their strategies to get banks on board.
For instance, our research found that in Southern Europe, especially in Spain, banks are investing heavily in payments modernisation: Spanish banks report they plan to commit an average budget of more than $2.4 million to payments modernisation over the coming year. Spanish banks are also leading in compliance and Platform-as-a-Service (PaaS) adoption, with almost half (48%) considering implementing a PaaS deployment model within their organisation.
In contrast, UK banks are advancing more cautiously and are more budget-conscious in their approach to modernisation. Approximately one in six banks say they have no plans for cloud adoption for payments modernisation, and 14% said they had decreased their budget allocations for modernisation over the past year. If UK banks want to be encouraged along their cloud and modernisation journey, it’s clear their cost concerns must be addressed. If partners can demonstrate modernisation doesn’t have to be exorbitantly expensive, and investment can result in efficiency savings and a more attractive product, they will increase banks’ appetite for cloud migration and modernisation.
Moving up into the Nordics, it’s cybersecurity worries that come to the fore. More than two in five (43%) of Nordic banks say cybersecurity and fraud risks are among their top two concerns regarding payments modernisation; this figure is even higher (64%) among Swedish banks, specifically. While a hybrid cloud approach allows banks to maintain tight security as they modernise, vendors who wish to attract Nordic customers should be ready to demonstrate the strength of their security controls and compliance with regional and international standards.
Vendor choice is make or break
Choosing the right approach to modernisation is one thing, but choosing the right partner to facilitate this is another. Vendor and partner selection is make or break, and with the pressure to innovate, banks must ensure they don’t rush the decision. Trust, capability, and long-term scalability are crucial qualities to look for in a new partner, if banks are to select a solution that can fuel their growth and scale with them, while maintaining full compliance. Additionally, the best partnerships are built on collaboration: vendors understanding the unique needs and concerns of each business, and banks relying on vendors’ expertise to gain the freedom to innovate at record speed.
The ‘all-in’ vision of cloud computing may not have materialised within finance, but this isn’t necessarily a failure. Hybrid cloud architectures are a wise choice for institutions balancing the competing demands of innovation speed, regulatory compliance, and operational control. As banks come to experience for themselves the benefits of cloud migration, they’ll be encouraged, along with others, to push forward on their modernisation journey.