Financial Benefits of Cloud Migration in Financial Institutions

Abstract

This study, titled "Financial Benefits of Cloud Migration in Financial Institutions," explores the economic viability, structural shifts, and operational enhancements of migrating core banking architectures from legacy on-premise servers to cloud infrastructure. Modern banking systems face rising data hosting rates, physical maintenance costs, and scaling limitations under traditional structures. This research investigates the financial benefits of converting capital-heavy Capital Expenditure (CapEx) to flexible Operating Expenditure (OpEx). A 5- year capital budgeting analysis (2021-2025) of a bank-led cloud migration program is conducted using capital budgeting metrics: Net Present Value (NPV), Internal Rate of Return (IRR), Payback Period (PBP), and Benefit-Cost Ratio (BCR). Quantitative metrics demonstrate that cloud migration reduced annual IT spend from 170 Crores to 102 Crores by 2025, while improving core system uptime to 99.99% and transaction latency to 35 milliseconds. The financial model yields a positive NPV of 392.4 Crores and an IRR of 45.1%, far exceeding the 10% cost of capital. The study concludes that cloud-based digital transformation is highly financially feasible, offering private commercial banks substantial cost savings, operational scalability, and a major competitive edge in the retail finance market. Keywords: Cloud Migration, Financial Benefits, CapEx to OpEx, Hybrid Cloud, System Latency, Cost-Benefit Analysis.