Shaping the Future of Financial Services: How Strategic Allies Enable Hybrid Cloud and AI Transformation – International Banker

By Simon Bennett, CTO, Rackspace Technology (EMEA)
 
 
 
 
As we navigate 2025 and enter 2026, the financial-services sector stands at a pivotal crossroads. The convergence of hybrid cloud, artificial intelligence (AI), advanced network security and a rapidly evolving regulatory environment is fundamentally reshaping how banks and financial institutions operate, innovate and build trust. This transformation is not just about adopting new technologies; it’s about redefining resilience, sovereignty and customer confidence in a digital-first world.
Trust remains the bedrock of financial services. In an era when customers expect seamless digital experiences, they also demand uncompromising security and transparency. Regulatory frameworks, such as the European Union’s (EU’s) Digital Operational Resilience Act (DORA) and General Data Protection Regulation (GDPR), are raising the bar for data sovereignty and operational resilience. Financial institutions must now ensure that sensitive data is not only protected but also managed within prescribed borders, with clear oversight and control.
The global expansion of data-localization laws means organizations must store and process data within specific jurisdictions, often requiring sophisticated strategies to ensure compliance and protection against foreign access. In response, many institutions are adopting sovereign cloud strategies, such as creating dedicated sovereign regions or partnering with hyperscalers to operate segregated environments with sovereign controls.
Seamless, secure movement of data between environments is now a core requirement. The sovereignty of data is not just about where it resides, but also how it is managed and moved—ensuring agility without compromising compliance or security. This is especially critical as financial institutions increasingly operate across borders and must navigate overlapping regulatory regimes.
Hybrid cloud has emerged as a strategic enabler for financial institutions seeking to balance innovation with compliance. By leveraging the strengths of both public and private cloud environments, organizations can optimize scalability, cost and regulatory requirements. Our latest research shows that nearly half of organizations now view hybrid cloud as critical to their IT (information technology) operations over the next two years. This approach enables banks to allocate workloads to the most appropriate environments, whether for compliance, performance or legacy integration—while maintaining the agility needed to respond to market changes.
The strategic value of hybrid cloud extends beyond infrastructure choices to encompass comprehensive risk management and operational flexibility. Financial institutions can maintain sensitive customer data and core banking systems in private cloud environments that offer enhanced control and auditability, while leveraging public cloud services for customer-facing applications, analytics and innovation initiatives. This selective placement enables institutions to meet stringent regulatory requirements without sacrificing access to cutting-edge technologies.
Furthermore, hybrid cloud architecture provides the foundation for seamless scalability during peak demand periods—such as end-of-month processing, regulatory reporting cycles or unexpected market volatility—while maintaining cost efficiency during normal operations. The ability to burst workloads to public cloud resources when needed, while keeping baseline operations in private environments, delivers both operational resilience and financial optimization.
Our experience working with leading financial institutions demonstrates the tangible benefits of digital transformation and AI integration. In one major case, a financial institution implemented a hybrid cloud and AI-driven solution to overhaul its reporting processes, achieving a remarkable 65-percent improvement in reporting times. This enabled faster data-driven decisions and more agile responses to market opportunities. The transformation was supported by 24/7/365 access to teams of experts, ensuring high availability, proactive issue resolution and continuous operational optimization.
Building on this success, the same institution in the Middle East leveraged Rackspace’s AI-adoption service, FAIR, to develop a generative AI (GenAI) solution that reduced anti-money laundering (AML) reporting times by 60 percent, streamlining compliance and enabling faster, more accurate decision-making in a critical area of financial operations. This aligns with the broader industry trend whereby AI is revolutionizing AML compliance by automating complex data analysis, reducing false positives and enhancing risk-detection capabilities. For example, AI-powered AML systems can detect two to four times more suspicious activities while cutting alert volumes by more than 60 percent, as demonstrated by leading banks such as HSBC.
Additionally, another client, Basware, successfully partnered with us to train an AI model that improved integration-code accuracy from 60 percent to 90 percent, accelerating customer onboarding and enhancing the overall customer experience. These examples highlight how, by embedding it into core processes, AI can deliver measurable business value and operational efficiency, reflecting the ongoing transformation across the financial sector.
AI is no longer a concept in financial services; it now has the opportunity to be a core capability, driving transformation across the sector. From real-time fraud detection to customer onboarding and know-your-customer (KYC) processes, AI-driven solutions deliver measurable improvements in efficiency, accuracy and customer experience.
For example, AI-powered fraud-detection systems now achieve detection rates of up to 97 percent and have reduced investigation times by 70 percent, while also cutting false positives and delivering average cost savings of 65 percent in fraud-management operations. In KYC processes, AI automates identity verification and risk assessment, reducing manual effort and improving compliance with increasingly stringent AML and KYC regulations.
The real differentiator lies in embedding AI to enhance or replace core business processes, rather than treating it as a side project. Financial institutions leading AI adoption are twice as likely to report significant returns on investment (ROIs) compared to their peers. The key is to align AI initiatives with business objectives, ensuring robust governance, fortifying security and scaling production.
As financial institutions modernize, the need for robust, secure and agile network infrastructure has never been greater. Providing a secure software-defined network (SDN) solution that can react to change is essential. SDN and secure SD-WAN (software-defined wide area network) solutions offer resilience, support changing bandwidth and performance demands, and enable the secure deployment of new locations or services.
A key aspect of this agility is the ability to move workloads and data seamlessly and securely between environments. This is where network security and network efficiency become paramount. The adoption of secure software-defined networking solutions is transforming how financial institutions manage their networks. SDN provides centralized, programmable control, enabling rapid adaptation to changing business needs while overlaying robust security to reduce the risk of breaches.
Zero Trust Architecture (ZTA) is also becoming a cornerstone of modern network security, operating on the principle of “never trust, always verify”. This approach ensures continuous verification for every user, device and application, significantly reducing the risk of unauthorized access and data breaches.
Integration with legacy systems, centralized management and policy-based segmentation are now industry standards, ensuring that security is consistent across all environments—on-premises, cloud and hybrid. Observability, automation and AIOps (Artificial Intelligence for IT Operations) are further streamlining incident management, allowing for rapid responses to threats and minimizing downtime.
As the technology landscape grows more complex, the role of managed service providers (MSPs) is evolving. No longer just technical vendors, MSPs are becoming opinionated strategic partners, helping financial institutions navigate the intricacies of workload placement, cloud integration, regulatory compliance, data sovereignty and network security. The most effective partnerships are those built on transparency, local expertise and a shared commitment to customer success.
The journey to modernization is not without challenges. Managing hybrid environments, addressing talent shortages in the cloud and AI fields, and staying ahead of evolving threats require a proactive, strategic approach. Our “2025 State of Cloud Report” highlights the importance of a workload-centric strategy, robust AI governance and investments in talent and partnerships as key drivers of success. Notably, 90 percent of IT and security leaders report experiencing cyberattacks in the past year, underscoring the need for resilient, proactive security strategies.
The future of financial services will be defined by those who embrace change, prioritize trust and foster strategic collaboration. The convergence of hybrid cloud, AI, advanced network security and regulatory change presents unprecedented opportunities for innovation and growth. But to truly thrive, financial institutions must place trust, sovereignty and operational resilience at the heart of their transformation journeys.

 
 
Rodney E. Hood— Former Acting Comptroller of the Currency
Paul Gruenwald— S&P Global Ratings
Mark Zandi— Moody’s Analytics
Brian Coulton— Fitch Ratings
Diana Robinson— J.P. Morgan Private Bank
Hacina Py— Societe Generale Group
Jonathan Kearns— Challenger
Serey Chea— National Bank of Cambodia
Melis Turgunbaev— National Bank of the Kyrgyz Republic
Tobias Adrian— International Monetary Fund
Peter Goettler— Cato Institute
Duoguang Bei— Chinese Academy of Financial Inclusion
Vitor D’Agnoluzzo— Bain & Company
Rajesh Gupta— CIMB Bank
Kamal Misra— Capgemini Invent India
William C. Handorf— George Washington University
Takeo Hoshi— University of Tokyo
Oliver Rui— China Europe International Business School
Apostolos Thomadakis— European Capital Markets Institute
David Messenger— PingPong
Shaanti Shamdasani— SAIAC
M. Jayadev— Indian Institute of Management Bangalore
Simon Bennett— Rackspace Technology
Ruchir Desai— AFC Asia Frontier Fund
Md Farhan Imtiaz— University of South Australia’s Business School
Rhodri Ellis Owen— Polarius International Real Estate
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