Why Hybrid Cloud is Becoming the Backbone of Modern Banking

Nadish Lad, Global Head of Product and Strategic Business at Volante Technologies 

Cloud computing has long been viewed as the future of banking technology. Early industry thinking assumed that, over time, banks would move the majority of their systems into the cloud. In practice, that expectation has not been fully realised. Although 86% of banks now prefer hybrid cloud approaches for their payment operations, complete cloud migration has become less of a priority for many institutions. Rather than pursuing full cloud deployment at all costs, these institutions are instead prioritising resilient, flexible hybrid environments. 

This shift reflects a growing maturity in how banks think about technology change. Hybrid cloud architectures offer a sensible balance between innovation and control – a crucial consideration in a sector where risk management, regulatory compliance and operational stability remain paramount. By blending on-premises infrastructure with cloud capabilities, banks can modernise at pace while still retaining oversight of their most critical systems. 

Hybrid cloud as the practical middle ground   

The hybrid cloud has quickly become the ‘sweet spot’ for financial institutions. The popularity of this choice is illustrated by Volante’s recent Big Survey 2025, which found that the majority (58%) of banks have adopted a hybrid approach to cloud adoption for payments modernisation, while only 13% follow a fully cloud-native approach. 

Many factors make this a powerful choice. Embracing cloud computing has become non-negotiable, especially due to its role facilitating AI adoption. With artificial intelligence revolutionising the sector and set to add significant value — it is estimated generative AI alone could bring $340 billion a year in additional value to the banking industry — consequently the cloud is not something institutions can ignore. Then there are the advantages it offers for stablecoin, facilitating frictionless on-and-off-ramps for smooth, compliant transactions. 

But banks must also balance these benefits with their regulatory responsibilities. Cognisant of this, and the hefty fines that accompany non-compliance, many banks are reluctant to give up full control of their infrastructure and migrate completely to the cloud. A hybrid solution, combining both on-premises and cloud-based infrastructure, allows banks to maintain control over critical processes while still enjoying the advantages of the cloud. 

Supporting modern payments at scale 

A hybrid cloud infrastructure is also uniquely suited to the evolved payments landscape, and to the principles underpinning payments modernisation – where scale, resilience and data-rich processing must coexist. The new ISO 20022 messaging standard, in full force from the end of November 2025, revolves around the sending of rich data, and data is, by nature, cloud independent. Adopting a hybrid approach, therefore, allows banks to securely access and use this data, wherever it resides, with ISO serving as the common language for translation and deployment. 

Real-time and instant payments are another area that benefits from hybrid cloud architecture. With SEPA ushering in instant payments in Europe and real-time payments accelerating across the United States, the ability to perform immediate transactions is pivotal. However, while real-time payment networks will allow for full cloud processing, they often require the switch to be in a known, physical location. A hybrid cloud architecture is the perfect mechanism for this, bridging the gap between on-premises infrastructure and a cloud environment. 

A further advantage of a hybrid approach, particularly when extended across multiple cloud environments, is the opportunity it provides to mitigate service issues. Recent public outages — such as the Amazon Web Services outage or the Cloudflare disruption — demonstrate the fallibility of even the biggest service providers. Rather than keeping everything on-premises, but a hybrid cloud approach helps distribute risk of service disruption and the costs this incurs. By spreading operations across multiple cloud environments, firms are still able to maintain some operational processes, in the event of an outage, or even avoid service loss altogether by temporarily switching clouds. 

Different regions, different priorities 

Hybrid cloud architecture offers benefits to every bank but contrasting adoption stories are emerging in different regions. For instance, the Big Survey 2025 revealed that banks in Southern Europe, particularly Spain, are investing heavily in payments modernisation, with Spanish banks planning to spend over $2.4 million on average across the coming year. Spanish banks are also leading in compliance and Platform as a Service (PaaS) adoption, with almost half (48%) considering implementing a PaaS deployment model within their organisation. 

On the other end of the spectrum, UK banks are approaching cloud adoption more cautiously and appear more worried about cost. Around one in six banks say they have no plans for cloud adoption in payments modernisation, and 14% said they had decreased their budget allocations for modernisation over the past year. In a strained financial climate, such concerns are understandable, but cloud cost-cutting is a false economy. Cloud migration does not have to carry a hefty price tag, but, more importantly, the cost of doing nothing is something no bank can afford. Not only do cloud environments offer efficiency gains and improved customer experiences, but they are also the foundation for banking innovation. If banks want a place in the future of finance, they need to embrace the cloud. 

In the Nordic region, cybersecurity is a pressing question. More than two in five (43%) of Nordic banks say cybersecurity and fraud risks are among their top two concerns regarding payments modernisation, with this figure rising to almost two-thirds (64%) among Swedish banks. While hybrid cloud architecture gives banks the benefit of greater control and security, while enabling innovation, cloud safety is still a valid concern. Vendors who want to serve banks, both in the Nordics and further afield, must be able to prove their security credentials and demonstrate compliance with regional and international standards. 

Why vendor strategy matters more than ever 

The shift towards hybrid cloud reflects changing priorities in how banks approach technology adoption. Rather than pursuing full cloud migration as an objective in itself, banks are increasingly focused on building infrastructures that balance innovation with control. Hybrid cloud enables institutions to take advantage of emerging technologies while maintaining the governance, resilience and compliance that the sector demands. 

As operational complexity continues to increase and expectations around availability, security and performance rise, flexibility will be critical. Hybrid cloud provides banks with the architectural foundation to meet current requirements while remaining well positioned for future change.