On-Premises vs Cloud AI for Financial Services: Which Is Safer?

AI is transforming how UK financial advisory firms operate. Pension transfers that took 30 minutes now take 5. Annual reviews that consumed 4 hours are done in 12 minutes. The technology works. The question is not whether to use AI, but how — and specifically, where your client data goes when you do.

This article is a direct, practical comparison between cloud AI and on-premises AI for financial services. We cover data security, GDPR compliance, cost, performance, and which approach makes sense for different scenarios. We build MonAI (on-premises), so we are transparent about our perspective — but we will also tell you when cloud AI is the right choice.

Cloud AI: How It Works

Cloud AI tools — including general-purpose services like ChatGPT, Copilot, and Gemini, and sector-specific platforms like Aveni, AdvisoryAI, Afternoon, and Marloo — process data on external servers. When you upload a pension transfer document or client file:

→The document is transmitted from your office to the provider's data centre
→AI models on their servers process the document
→Results are sent back to you via the internet
→The document (and potentially its contents) may be stored on their servers

Cloud Advantages

•No hardware to install — sign up and start immediately
•Lower upfront cost (subscription model)
•Automatic updates and new features
•Access from any device with internet
•Larger AI models available (more computing power)

Cloud Risks

•Client data leaves your building
•Third-party processor relationship under GDPR
•Potential international data transfers (Schrems II)
•Vendor lock-in and pricing changes
•Data breach exposure if vendor is compromised
•Internet dependency — no offline processing

On-Premises AI: How It Works

On-premises AI installs dedicated hardware in your office. All processing happens locally on your own equipment. When you upload a document:

✓The document stays on your local network
✓AI models on your hardware process it — no internet required
✓Results are stored on your systems only
✓Nothing is transmitted externally at any point

On-Premises Advantages

•Zero external data transfer — data never leaves
•No third-party processor relationship under GDPR
•Complete audit trail on your own systems
•Works offline — no internet dependency
•No vendor lock-in on your data
•Unlimited processing — no per-document fees

On-Premises Considerations

•Hardware installation required (2 hours)
•Higher initial investment than cloud subscriptions
•Physical desk space needed for hardware
•Model size constrained by local hardware

GDPR and Regulatory Implications

This is where the distinction between cloud and on-premises becomes critical for financial services. UK GDPR imposes specific obligations depending on where data is processed:

GDPR Requirement	Cloud AI	On-Premises AI
Data processor contract	Required — vendor is a processor	Not needed — no processor
DPIA for AI processing	Complex — must cover third-party risks	Simpler — no external data flows
International transfers	Possible — Schrems II applies if US infra	None — data stays local
Right to erasure	Depends on vendor — check their policy	Full control — delete locally
Audit trail	Split — across your systems and vendor	Complete — all on your systems
Breach notification	Dual risk — your breach + vendor breach	Your risk only — no vendor exposure

The FCA Mills Review (January 2026) has specifically highlighted data sovereignty and outsourcing concentration as themes for its long-term AI review. Firms that process client data locally are inherently better positioned for whatever recommendations emerge in summer 2026.

Cost Comparison Over 3 Years

Cost is often cited as the reason to choose cloud over on-premises. Here is a more complete picture:

Cloud AI (Typical UK Provider)

•Monthly subscription: varies by provider and firm size
•Per-document fees may apply at high volumes
•Hidden costs: DPIA preparation, processor contract reviews, ongoing monitoring, PI insurance increases
•Pricing can increase at renewal — you have limited leverage

On-Premises AI (MonAI)

•Monthly payment includes hardware, software, support, and updates
•Unlimited document processing — no per-use fees
•No hidden compliance costs — no processor contracts, simpler DPIAs
•Cost stays flat as volume grows

The break-even point depends on your volume and which cloud provider you are comparing against. For high-volume firms (50+ transfers per year), the total cost of ownership for on-premises is typically lower over 3 years when you factor in compliance overhead, avoided per-document fees, and the cost of an additional admin hire that automation replaces.

Who Uses What: The UK Market

Provider	Deployment	Data Location
Aveni	Cloud	External servers
AdvisoryAI	Cloud	External servers
Afternoon	Cloud	External servers
Marloo	Cloud	External servers
Intelliflo IQ	Cloud	External servers
MonAI	On-Premises	Your office only

As of February 2026, MonAI is the only AI solution for UK financial advisors that processes client data entirely on-premises. Every other provider in the market operates on a cloud model.

When Cloud AI Is Fine

Cloud AI is a perfectly reasonable choice for tasks that do not involve sensitive client data:

✓Marketing content and social media drafts
✓Internal communications and meeting summaries
✓General research and market analysis
✓Template creation and process documentation
✓Any task where no personal client data is involved

When On-Premises AI Is Essential

On-premises becomes the clear choice when client documents are involved:

→Pension transfer document processing (NI numbers, fund values, personal details)
→Annual review preparation (full client financial picture)
→Client onboarding document extraction
→Compliance documentation with client-specific data
→Any workflow touching personal financial information

Frequently Asked Questions

Is cloud AI safe for financial services?

Cloud AI can be used for non-sensitive tasks (internal communications, marketing content, research). However, for processing client documents containing personal data — pension details, National Insurance numbers, financial information — cloud AI creates data processor relationships under GDPR and sends sensitive data to third-party servers. The FCA Mills Review has flagged data sovereignty and outsourcing concentration as key regulatory concerns.

What is on-premises AI for financial advisors?

On-premises AI is dedicated hardware installed in your office that runs AI processing locally. Client documents are processed on your own equipment — data never leaves the building, never touches the internet, and never goes to external servers. MonAI is currently the only on-premises AI solution built specifically for UK financial advisory firms.

How does GDPR apply to AI in financial services?

Under UK GDPR, any AI tool that processes personal data externally creates a data processor relationship requiring contracts, DPIAs, and ongoing monitoring. If the provider uses US-based infrastructure, Schrems II transfer considerations also apply. On-premises AI eliminates these requirements because data never leaves the firm's control — the firm remains sole controller with no processor relationship.

Which AI providers for financial advisors use cloud vs on-premises?

Cloud-based: Aveni, AdvisoryAI, Afternoon, Marloo, and Intelliflo IQ all process data on external servers. On-premises: MonAI is the only provider that installs dedicated hardware in the firm's office for fully local processing. This distinction matters because it determines where client data goes and what GDPR obligations are triggered.

See the on-premises difference

Explore our Private On-Prem AI solution page for a detailed technical breakdown, or book a 15-minute demo to see MonAI processing documents in a live environment.