Cloud Migration in Banking: Why Compliance, Cost, and Complexity Still Derail Success

In 2023, major U.S. banks embarked on extensive cloud migration initiatives, navigating complex regulatory and operational landscapes. Industry leaders underscored the critical importance of compliance and risk management, advocating for cloud adoption to be approached not merely as a technological upgrade but as a comprehensive risk transformation strategy.

Cloud promises agility, scale, and innovation. But in banking, it's a double-edged sword.

Financial institutions stall or fail their cloud programs despite strong executive sponsorship. Legacy processes, fragmented data, and regulatory friction collide with cloud-native architectures. At Coforge, we’ve stepped in to correct more than 50 banking migrations.

Let’s decode the three traps that derail banking cloud journeys and how Coforge helps clients escape them.

Trap 1: The Compliance Blind Spot

(When Lift-and-Shift Becomes Drop-and-Break)

Too many banks rehost apps to the cloud without mapping regulatory boundaries. The result?

• Data Sovereignty Breaches: For example, EU loan data stored in US regions violates GDPR.
• Audit Inconsistencies: Transaction trails and control checkpoints go missing, impacting Basel III/IV and MiFID II compliance.
• Fragmented Controls: SOC 2, PCI DSS, and FFIEC standards managed in silos across hybrid environments

The Coforge Fix

“Compliance isn't a checklist; it must be encoded into architecture.”

We tackle this at the foundation:

• Regulatory Blueprinting: We pre-map data flows against 120+ global mandates, including PSD2, GLBA, and DORA.
• Infrastructure-as-Code Guardrails: Using Terraform and CloudFormation templates, we enforce policies on location, encryption, and access.

Client impact: Coforge implemented a cloud-based Core Banking System (CBS) for a leading co-operative bank struggling with RBI compliance gaps, fragmented data controls, and legacy system limitations. The solution embedded automated regulatory guardrails, standardized reporting, and data sovereignty protocols, fully complying with 450+ RBI-mandated reports and $2.7M annual savings.

Trap 2: The Cost Mirage

(When Pay-as-You-Go Becomes Pay-as-You-Bleed)

Cloud is marketed as a cost saver. Yet 72% of enterprises globally exceeded their cloud budgets in 2023, with financial services among the most affected sectors due to unoptimized architectures and poor visibility. IDC estimates that 20–30% of all cloud spending is wasted due to resource sprawl and inefficient provisioning. Here’s why:

• Resource Sprawl: Unused VMs, orphaned volumes, and zombie environments drive up compute costs.
• Integration Drag: Legacy middleware and fragmented tool chains create hidden expenses, with 56% of enterprises reporting delays in business initiatives due to unexpected data costs.
• Skill Gaps: Over-provisioning by teams unfamiliar with cloud-native autoscaling or storage tiers.

The Coforge Fix

“Cost optimization starts before migration, not after go-live.”

We embed FinOps into the migration lifecycle:

• Pre-Migration TCO Modeling: Simulate and compare on-prem vs. cloud run-rates, aligned to workload patterns.
• AI-Powered Rightsizing: Predictive allocation based on usage—auto-scaling compute for peak demand, throttling non-critical processes.
• Cloud Economics Dashboards: Live spend tracking by business unit, integrated into financial governance and CFO workflows.

Client Impact: Coforge helped a global financial services client reduce monthly cloud consumption costs by 45% through rightsizing VM instances, optimizing storage disks, converting PAYG instances to Reserved Instances, and automating non-production VM schedules.

Trap 3: The Hybrid Chaos Spiral

(When Best-of-Breed Creates Worst-of-Operations)

Most banks retain core systems on-premises while moving digital workloads to the cloud. Sounds strategic. But it introduces:

• Data Fragmentation: Fraud checks, KYC workflows, and treasury systems struggle due to non-synchronized data across mainframes, private, and public clouds.
• Toolchain Proliferation: Disparate monitoring tools offer no unified view, causing incident detection and response delays.
• Security Vulnerabilities: Perimeter-less apps expose outdated on-prem APIs to public interfaces.

The Coforge Fix

We bring convergence to fragmented ecosystems.

• Unified Control Plane: One interface for observability, automation, and policy enforcement across legacy, private, and public cloud assets.
• Pattern-Driven Modernization: Refactor monoliths into containerized microservices before migration, via Coforge’s App Modernization Framework.
• Integrated CloudOps Platform: Orchestrates and correlates logs, metrics, and events across environments with built-in compliance detection.
• Client Impact: Coforge supported a UK-based bank in migrating its core banking platform from IBM COBOL to Microfocus COBOL, moving data from DB2 on mainframe to Oracle on UNIX, and preparing the platform for cloud hosting. This modernization laid the foundation for future cloud adoption and integration.

Escaping these traps requires more than cloud expertise; it requires financial-grade engineering with built-in compliance, performance, and cost control.

Summary of Common Cloud Migration Traps

The Coforge BFS Stack That Powers Results

We’ve built reusable, proven assets that accelerate and de-risk cloud journeys for banks:

1. Core Banking Modernization Framework – A cloud-agnostic transformation approach that supports modernization of legacy core systems, with embedded compliance, governance, and resilience features.
2. Pre-Configured Cloud Landing Zones – Secure, compliant cloud environments tailored for BFSI, incorporating best practices in identity and access management (IAM), logging, monitoring, and regulatory alignment with standards such as MAS, PRA, and OCC.
3. Real-Time Data Integration Solutions – Tools and frameworks that enable synchronization between mainframes and cloud platforms, ensuring data consistency, traceability, and support for hybrid operations.

Conclusion

Cloud Migration Is Not an Exit — It’s an Evolution. Banks that treat cloud migration as just a platform switch are destined to repeat the mistakes of the past. Cloud isn’t just about speed—it’s about control, clarity, and trust at scale. To lead in the next wave of digital banking, institutions must:

• Treat compliance as an architectural constraint, not a checkbox
• Build FinOps into every decision from Day Zero
• Engineer a hybrid as a long-term strategy, not a compromise

At Coforge, we’ve helped BFS clients unlock significant cost savings, modernize safely, and meet aggressive transformation timelines - all without regulatory missteps or runaway costs.

Ready to escape the trap? Explore how Coforge’s Cloud Framework reduces migration risks and delivers resilient outcomes.