Scale, security and efficiency drive cloud adoption in financial services

Yvonne Dunn, Angus McFadyen, Luke Scanlon and Mhairi Mival of Pinsent Masons were commenting after Pinsent Masons worked with the Financial Regulation Innovation Lab (FRIL) to explore how attitudes, practices and regulation relevant to the use of cloud-based infrastructure and services have moved on within the financial services sector since 2016.

Back then, Pinsent Masons collaborated with UK Finance on a study that highlighted the challenges that banks faced when migrating systems and data to the cloud. At that time, cost savings were seen as the primary driver for moving to the cloud. The new study, which comprised a survey and individual interviews with business leaders from organisations operating within the sector, has highlighted how it is now “strategic imperatives” rather than cost-cutting that shape firms’ approach to cloud.

Asked to rate the importance of certain benefits of cloud adoption, just 39% of survey respondents said costs were important or very important – more than a third said costs were unimportant. In contrast, 77% of respondents said improved scale was an important or very important benefit.

“While cost savings may have been an initial driver for some, the demand for speed and agility has proven to be a core, enduring benefit of cloud,” according to the Pinsent Masons report, which also highlighted how operating in the cloud can help financial services firms access new technologies like AI faster than they might otherwise be able to.

“A key theme from our interviews was the focus on acceleration,” the report said. “Cloud platforms provide an unparalleled ability to experiment and deploy new capabilities rapidly… This agility is no longer a 'nice-to-have'; it is a critical source of competitive advantage.”

The survey also identified that industry broadly view cloud adoption as enhancing security and operational efficiency – in each case, 72% of respondents said those benefits were either important or very important. In respect of security, the findings highlight how industry attitudes have evolved – security was seen as one of the main barriers to cloud adoption by industry in 2016.

“This data confirms that the initial belief in automatic cost savings has been thoroughly debunked,” according to the Pinsent Masons report.

While scale, security and efficiency are the primary drivers of cloud adoption in financial services today, many institutions still have some ‘red lines’ about what data and systems they are comfortable operating in a cloud environment.

The Pinsent Masons and FRIL report found that many survey respondents – between a quarter and a third – are reluctant to move “critical core functions”, such as moving payment processing, regulatory compliance and reporting, and core banking systems, to the cloud.

Yvonne Dunn of Pinsent Masons said: “In 2016, the conversation was dominated by caution, risk mitigation, and the challenge of fitting a transformative and not-widely adopted technology into a traditional outsourcing framework. Almost a decade later, the landscape has fundamentally changed. The discussion is no longer about if financial institutions should adopt cloud, but how they can leverage it as a cornerstone of their strategic future.”

Angus McFadyen said: “What began as a conversation about cost and efficiency, enabling long-held, often in-house, capital heavy data centre equipment to be decommissioned, has evolved into a much more nuanced discussion about resilience and flexibility as the cost drivers have reduced and, indeed, what has been discovered is that cloud is not always the solution – for example, mainframe systems remain and alongside cloud for legacy where a cloud transition is prohibitive and indeed highly risky.”

Luke Scanlon added: “The shift from cost-driven to strategy-led cloud adoption reflects a maturing financial services sector that now sees cloud as a foundation for innovation and resilience. The findings of our report show that financial institutions are addressing governance, data sovereignty and compliance issues in the cloud context, which is essential in highly regulated markets.”

Mhairi Mival said: “The narrative around cloud adoption in financial services has shifted dramatically. The report shows that while data security was once seen as a major hurdle, it is now increasingly viewed as a key advantage. This evolution underscores a broader trend: cloud is no longer just about cost and scalability – it is becoming central to strengthening resilience.”