The majority of banks and insurers find it challenging to maximise the value from their cloud investments, according to the Capgemini Research Institute's World Cloud Report for Financial Services 2025.
The report reveals a noticeable divide in how traditional banks and insurers versus fintechs and insurtechs perceive and utilise their cloud technology. While most traditional financial institutions adopt cloud solutions primarily for operational efficiency—accounting for 84% of respondents—the new-age companies seek to boost sales, with 62% mentioning this objective.
Financial institutions are operating in a complex environment marked by inefficiencies in data management, cybersecurity vulnerabilities, regulatory challenges, and shifting customer expectations. The report notes a 26% increase in the mention of cloud-related terms in the annual reports of the top-tier global banking and insurance firms from 2020 to 2023, indicating a turn towards cloud solutions as a risk mitigation strategy.
Despite this shift, under 40% of financial services executives report being highly satisfied with the results of their cloud investments when measuring success by lower operational costs, heightened scalability, accelerated innovation, advanced data analytics, and improved security and compliance.
The challenges stem from several factors, including the prevalent lift-and-shift cloud migration approaches, unforeseen cost increases during rapid scaling, convoluted pricing models, and inefficient governance and management practices. Ravi Khokhar, Global Head of Cloud for Financial Services at Capgemini, states, "Cloud adoption should be viewed as the start of a transformative journey that fuels long-term business growth, rather than the end game or destination. What's clear from our research is that while the technology is seen by financial institutions as a building block, some firms still consider cloud a cost-saving measure, whereas innovative disruptors leverage it to redefine their operations."
The complication further intensifies given the enormous amounts of personal, financial, and transactional data managed by banks and insurers. Key concerns highlighted by industry leaders include legacy systems hindering data integration, protecting customer data, and improving data quality.
Regulatory pressures are also mounting with the imminent enforcement of legislation such as Europe's Digital Operational Resilience Act (DORA) and the Consumer Financial Protection Bureau's Section 1033 of the Dodd-Frank Act, which require stronger compliance and increased reliance on cloud-native solutions to handle increased data exchanges cost-effectively.
Technology limitations are cited by 81% of executives as a hindrance to meeting business objectives. Traditional financial institutions show limited maturity in critical technological areas such as AI, predictive analytics, and robotic process automation, with only a small percentage demonstrating proficiency.
The report categorises 12% of banks and insurers as "cloud innovators," who benefit from a clear cloud vision supported by scalable platforms and mature ecosystems, yielding superior results in upsell, cross-sell, data monetisation, and product development.
Encouraging an innovation-driven and cloud-native culture is crucial for financial institutions to enhance operational efficiency and foster innovation, as suggested by the research. This involves building applications native to the cloud, investing in cloud expertise, promoting knowledge sharing, and democratising technology access across all teams.
