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The Impact of the Cloud on FinTech in 2022

July 5, 2022


Impacts of Cloud Technology in Fintech

Cloud computing and cloud-based applications have been transforming industries for years. As the financial services sector moves towards digitalization in the age of disruption, the cloud is playing a pivotal role in supporting the transformation.

Cloud-based services have become ubiquitous, and cloud computing is one of the top buzzwords of 2022. According to recent reports from Gartner, end-user spending on public cloud services is expected to hit a high of 20.4% in 2022. This amounts to a total of $494.7 billion, up from $410.9 billion in 2021. The cloud has been leveraged across industries to drive down costs, increase efficiency, and improve security. Cloud computing utilizes a remote server (rather than an on-premise one) for the storage, management, and processing of data over the internet. This facilitates more secure storage as well as 24/7 uptime for banks and FinTechs, who are looking to scale and improve service and product offerings in a bid to be more customer-centric.

The wide breadth of benefits makes the technology, especially appealing for the banking and finance sector, which has also been proactive in applying cloud computing to help solve long-standing headaches and improve payment along with enhancing the various banking products and services.

The convergence of cloud computing and FinTech has already infiltrated the everyday lives of consumers and businesses. Consumers can easily complete online transactions via Apple Pay, PayPal, and other digital payment tools. These applications have streamlined the payments process and allowed for better management of transactions by all involved entities.

As FinTech continues to disrupt the financial sector and create more payments and banking solutions, cloud computing solutions provide an agile infrastructure for those solutions to exist and evolve.

Cloud Considerations & Other Implications for FinTech

While cloud technology holds much promise for the FinTech industry, it also presents several challenges. The benefits must be weighed against the regulatory and security implications of cloud adoption for those in regulated industries, including banks. There are some key issues that have the attention of global financial watchdogs, and how these key issues will play out is, in some cases, yet to be seen.


The cloud is agile, efficient, and secure, but it is not perfect. One issue that regulators are eyeing is the handling of service continuity. There must be continuity in transitioning from the cloud and back to owned databases should a mishap occur. Banks and other third-party providers (TPP) are also facing scrutiny in regard to how sensitive customer data is stored, used, and kept secure within the cloud infrastructure.

Regulators are also tuning in to see how banks and TPPs handle the mixing of financial data with other data on servers shared between entities. The Office of the Comptroller of the Currency continues to keep a close watch on relationships between banks and TPPs, including cloud providers. This growing concern will only become more valid as we see more tech giants (Amazon, Google, etc.) offer financial services. As tech companies, they are far less regulated than banks. However, as financial service providers, they must adhere to compliance standards and banking rules.


Security is another high-priority factor as we see the massive shift from traditional IT infrastructure over to the cloud. Customer data protection and securing sensitive personal information are paramount. The European Banking Authority (EBA) recommends that banks and financial institutions (FIs) handle this issue head-on before outsourcing anything to cloud providers.

Overcoming IT Inertia

While the cloud promises to overcome many of the handicaps and burdens of legacy IT systems, many have been slower in adopting cloud computing due to cost and operational fears. The risk of slow adoption is that of being outpaced by more agile, innovative competitors who have been faster to adopt new technologies and realize the inherent business benefits. In embracing the transformative power of cloud computing services, financial players have been able to surmount several long-standing challenges, including:

Lack of IT and business alignment: IT initiatives are often separated from business strategy and do not include service mapping of service level agreements.

Stagnant, unmovable IT models: Piecemeal IT initiatives like software-defined networks, along with virtualization and automation, often do not deliver on ROI.

Legacy IT dependency: Mainframes and waterfall development mean extensive development cycles and poor cost management. Yet many core applications are centered around the legacy IT infrastructure.

No single source of truth: Banks have long relied on disparate data sources for reporting, which can be cumbersome across large enterprises. Multiple tools, platforms, and workflows complicate reporting and analysis.

In looking at the migration from mainframes to cloud infrastructure, risk reduction is a big factor and value driver. Paired with additional computing power and increased efficiency, it’s hard to make a case against moving to the cloud. A uniform and highly agile infrastructure can also reduce complexity, making it easier and less expensive to manage risk.

Understanding Cloud Risks

While the benefits seem to far outweigh the downside, there are some key factors that organizations need to be aware of as they consider a move to the cloud.

Regulatory Factor: As a heavily regulated industry, some banks fear they won’t be able to migrate to the cloud or could face substantial fines.

Reality: The Financial Conduct Authority (FCA) and other regulators are releasing guidance and support around cloud adoption.

Security Factor: According to Websense, financial institutions experience increased security incidents than other industries, causing a reluctance to work with TPPs, especially when it comes to data.

Reality: Cloud encryption services can provide additional layers of data encryption for sensitive applications not controlled by cloud service providers. Encryption services maintain encryption certificates and are independent of the cloud application and the end-user, with only cipher text stored in the cloud application when information is sent.

Data Storage Factor: Strict regulations around data storage may inhibit cloud provider options, especially those located in other countries.

Reality: Many cloud providers are building data centers within a customer’s region to align services with local regulatory and compliance requirements.

Outsourcing Factor: Cloud collaboration means opening up operational systems to TPPs and contractors hired by those TPPs, in addition to granting access to other sensitive systems as well. This increases the risk.

Reality: Cloud providers often offer on-demand availability and durability levels, along with data control policies and change control procedures. Together, this minimizes disruption to service and preserves version control through all changes and configurations. Data incidents typically result in immediate notification by the cloud provider.

Migration Factor: According to reports, 75% of data teams find it difficult and face problems when migrating to the cloud.

Reality: Large-scale adoption requires a holistic migration plan for most organization transitions. Migration should follow a standardized framework and include a sound process of planning, analysis, design, building, testing, and deployment. This can ensure an effective migration.

Impact of Cloud on FinTech: Final Thoughts

Cloud technology has enabled banks and FinTechs to reduce costs, evolve to better business models, and innovate more quickly. As the amount of data continues to grow, the cloud will enable startups to process large amounts of data quickly and inexpensively, supporting scalability. The end result has been—and will continue to be—the faster delivery of better products and services.

Enhanced workflows that are more secure and customer-centric will accelerate innovation now and in the future. Get in touch with our team to know more about the impact of the cloud on Fintech.

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