Cloud Computing in Banking: The Unspoken Challenges No One Talks About

Cloud computing in banking! It’s everywhere — customer service chatbots, fraud detection, CRM, even regulatory reporting.

But ask most banks about moving core banking to the cloud, and the conversation gets awkward.

Most banks have modernized the edges, but their core systems are still deeply rooted in legacy infrastructure. Why? Because nobody wants to be the bank that goes down for hours due to a failed cloud migration. ↗️

Yet, staying put comes with its own risks — slow innovation, rising costs, and losing customers to more agile competitors.

So, let’s talk about it — the real challenges banks face when shifting core banking to the cloud and what they can do about it.

The Reality Check: Why Core Banking Remains Largely On-Prem

Most banks still run core banking on mainframes built in the ’70s and ’80s, written in COBOL, and layered with decades of patches and integrations.

This isn’t just nostalgia — it’s because:

Stability matters more than speed – Core banking must process transactions in milliseconds. Cloud introduces new latency risks.

Regulators scrutinize every move – Banks deal with strict compliance laws, making any change in infrastructure a legal headache.

Migration is messy – Unlike FinTechs that start cloud-native, banks have years of legacy baggage that’s tightly woven into their operations.

Who’s Already Taking the Leap?

Despite the challenges, many are leveraging cloud computing in banking.

For example, Goldman Sachs has really set a benchmark for uptime and reliability in transaction banking.

Their platform runs on a sophisticated architecture using some of AWS’s most powerful services. It’s built on Amazon ECS on AWS Fargate for container management, while Amazon CloudWatch Synthetics ensures everything stays online without glitches.

Then there’s AWS CodeDeploy, helping automate their deployment processes to minimize disruptions and Amazon MSK for handling streaming data.

In the background, tools like AWS Lambda and Amazon Aurora are used to keep things fast and responsive.

Unpacking the Challenges of Moving Core Banking to the Cloud

While the promise of improved agility, scalability, and cost-efficiency is exciting for cloud computing in banking, the reality is often more challenging.

1. The Hybrid Approach: Balancing On-Prem & Cloud 

Instead of an all-or-nothing move, many banks are opting for a hybrid model: 

✅ Keep high-risk workloads on-prem (like real-time transaction processing).

✅ Move non-critical core functions to the cloud (like batch processing, loan origination).

✅ Use containerization (Kubernetes) to make workloads portable across both environments. 

Case Study: HSBC 

HSBC has taken a hybrid approach, leveraging Google Cloud for analytics while keeping core banking functions within its private cloud.

This allows them to innovate without exposing mission-critical workloads to public cloud risks.

2. Cloud-Native Core Banking: Is It the Future? 

For some forward-thinking banks, skipping the hybrid approach altogether and adopting cloud-native core banking systems has proven to be an effective solution.  

Cloud-native platforms, designed from the ground up to be API-first and microservices-based, provide scalability, flexibility, and faster time-to-market for new features. 

Example: Thought Machine 

UK-based Thought Machine provides a fully cloud-native core banking platform that is API-first and microservices-based.  

Banks like Lloyds and SEB have already partnered with them to build next-gen cloud-first banking systems. 

3. Partnering with the Right Cloud Engineering Experts 

One of the most critical elements of a successful cloud migration is working with the right partners — especially those with cloud engineering expertise tailored to banking.

Transitioning core banking systems is no small feat. It requires deep knowledge of:

✅ Cloud architecture that integrates seamlessly with existing systems.

✅ Regulatory compliance specific to financial institutions, like GDPR in the EU or the FFIEC in the U.S.

✅ Disaster recovery, security best practices, and continuous monitoring to mitigate risk.

This is where working with trusted cloud engineering teams (like Azilen) helps banks design the right strategy — whether hybrid or full cloud-native.