Part I: The Past and the Potential of Cloud-Based Solutions in the Financial Services Industry 

By Colt Younger, Delta Data, Senior Vice President, Product

This is the first installment in a three-part series that explores Cloud Technology and the Financial Services Industry. In addition to this entry, which addresses the slow acceptance of cloud-based solutions within the industry and how perceptions have shifted, this series will feature future entries that delve into the specific benefits of cloud-based solutions for financial institutions as well as an examination of the public cloud. 


Cloud computing is a type of on-demand service that provides access to shared resources, applications, or storage over the Internet. It enables financial institutions to store and process data in remote servers instead of local systems.

Many financial institutions today have a presence in the cloud, but acceptance has been slow and adoption in the financial services sector is still at a relatively early stage. While migration to the cloud is gaining momentum within the industry, rather than rebuilding in the cloud, many firms are seeking and finding cloud-based solutions from outside vendors.

Conversations have been ongoing for many years about how and when the sector should adopt cloud technologies and the risks involved.

The financial industry has been hesitant to modernize its infrastructure for the cloud, and that hesitancy can be attributed to reasons ranging from the complexity of existing infrastructure to regulatory challenges and security concerns. As a result, firms have had to confront business model-related challenges like legacy technology, high-running costs, and lack of scalability.

The widespread tentativeness is not necessarily due to a lack of interest, but rather a desire to balance security and regulatory concerns with the clear benefits of agility delivered by the cloud and cloud-based solutions.

What keeps financial services companies away from cloud solutions?

It’s hardly surprising that risk-conscious financial institutions have been wary of dancing in the cloud. Many firms within the industry had initial resistance to cloud technologies primarily due to concerns around security, vendor selection, a cloud skills gap, and regulatory compliance.


The perceived security risk presents one of the most cited and standard reasons for financial firms’ hesitancy in turning to cloud-based solutions. The data owned by these institutions is highly sensitive and critical in nature.

Even with security certificates and encryption standards in place, financial firms have largely preferred to have complete control over their data. Because of the security component, the private in-house cloud was naturally the initial move for many companies seeking to break away from the traditional on-premises, server-based IT infrastructure.

In recent years, cloud service providers have further developed their security and resiliency capacities, which is why many financial institutions have taken a hybrid cloud approach – one that involves both private and public cloud – to balance security and costs.

Vendor Selection

Concerns around choosing the right vendor is also a factor that has contributed to the industry’s cloud adoption lag. Financial firms that have time-sensitive trading applications need exceptionally strong SLAs with no downtime, as incidents of publicized downtime can cause significant damage to a firm’s reputation.

For many companies, the key to accelerating digital transformation is more effective vendor participation. When discussing partnerships, financial executives cite a lack of coordination and transparency of vendors as a concern.

Cloud Skills Gap

Another challenge to cloud adoption faced by financial companies is personnel. Technical hires are critical for the success of any strategic digital initiative, including cloud transformation, but many financial firms have struggled in the past to attract and retain technical talent due to the widespread prevalence of legacy systems.

Financial institutions are famous for their legacy systems, having spent generations building software. Current operating models, however, are not agile enough to keep up with the latest technological developments. As a result, these institutions are now looking for and accepting cloud-based solutions to reduce dependency on these rigid legacy systems.

Any digital transformation requires not only access to the technology features, but also the personnel with skills and expertise in cloud application.

As a result of the challenge in finding technical hires, new partnership opportunities have emerged as a means of addressing the skills gap, with financial firms looking to third-party service providers for cloud enablement. That’s where an experienced vendor can help accelerate digital transformation.

Regulatory Compliance

Regulatory compliance is yet another concern that has historically besieged financial firms and hindered the pace of cloud implementation. In the past, some regulatory agencies mandated in-depth audits and due diligence before a vendor could be chosen for cloud services. The time, effort, and expense needed for such activities can be rather significant, causing delays.

Just as they’ve done with their security capabilities, cloud service providers have also worked to further develop their compliance scope. These enhancements continue to establish cloud-based solution providers as increasingly adept at operating a more modern and secure infrastructure than many financial firms could do in-house.

What has driven shifts in perception within the industry around the cloud?

The Covid-19 pandemic exposed the inadequacies of existing technology and the need for legacy financial institutions to start making serious changes or risk being left behind.

Since the pandemic, the wide range of advantages offered by cloud solutions have only become more evident, including flexibility and scalability, as well as a better end-user experience. This has led some financial companies to accelerate transformation initiatives, as a growing digital appetite and lower infrastructure costs facilitates a more rapid cloud adoption trend within the industry.

But while the pandemic made many digital requirements clear, it also disrupted progress. As financial services companies, like the rest of the global economy, scrambled to transform working practices and business functions, there were inevitable pauses or delays on some longer-term transformation projects, including cloud adoption.

The cloud skills gap has also slowed implementation for some firms, forcing them to reimagine their IT “talent stack.”

In a review of one Boston-based financial services firm’s December 2022 job listings, nearly a quarter of the roles being hired for were tech-focused positions, and most involved cloud computing. The firm hired around 2,800 tech-focused employees in the first 10 months of 2022 alone, which is more than it did in all of 2021.

Outsourcing on the rise

But hiring new talent isn’t an option for everyone. To the extent that a skills gap is seen as an inhibitor to firms’ immediate digital transformation goals, a new willingness of firms to look externally for answers has emerged.

Industry perceptions of both the cloud and third-party providers have shifted in recent years. As technology has progressed, the cloud now presents outsourcing opportunities that were previously either unavailable or unacceptable within the financial services industry.

Outsourcing allows financial institutions to partner with an experienced, industry service provider that can facilitate cloud enablement with features that are most relevant to a firms’ specific needs. The security, scalability, and functionality of third-party cloud-based solutions can’t be matched by most legacy systems.

Learning to mitigate risks during a digital transformation

There are genuine reasons for financial institutions to be cautious with cloud computing. These don’t all stem from technical hesitancy, but also from a need to be careful with concerns of risk.

Since risk-related issues carry a different meaning for the financial sector than in other fields, it’s an obvious explanation for why the industry was slow to embrace cloud platforms, citing a mix of regulatory concerns, security desires, and risk management goals.

As the adoption of cloud computing became, and continues to become, more prevalent, financial institutions have learned to weigh the benefits and risks involved, which has led to a greater confidence and a full investment, both physically and ideologically, in their digital transformation decisions.

After spending the last five to seven years observing from afar the numerous benefits the cloud can offer and monitoring the technological improvements, these firms are now armed with a greater understanding of how cloud-based infrastructures and solutions operate.

As the trend has evolved and external factors have sped up the need for transformative initiatives, many financial services companies have been able to establish more resolute and immediate justification to move forward with cloud solutions.

As an example of path-breaking cloud migration within the industry, the Financial Industry Regulatory Authority (FINRA), which oversees broker-dealers, has already moved all its technology to the public cloud. The group previously spent tens of millions of dollars a year to run its own servers but now rents space on AWS servers for a fraction of that amount.

The use of web-based systems has enabled FINRA to process hundreds of billions of market records, while facilitating surveillance staff’s analysis of unusual trading activity by pulling data in seconds or minutes, compared with hours previously.

The forecast for the future is cloudy

The tensions and factors that have forced a more careful approach to cloud application among the financial services industry are complex, but they can clearly be mitigated. This sector, and even more specifically the fund industry, isn’t known for moving quickly (it’s been noted that DTCC used fax machines even just three or four years ago).

But as we’ve seen industry perceptions of the cloud shift and the technology further enhanced, financial institutions must ensure they have the adaptability to make rapid adjustments in a dynamic environment.

At Delta Data, we moved all our products to the cloud. Contact us today to learn how our cloud-based solutions can reduce dependency of older legacy systems within the financial services industry.


The second installment in this Cloud Technology in the Financial Services Industry series will explore the benefits and advantages that cloud-based solutions can bring to financial institutions.