Data centres
in most cases it will be a kind of a hybrid approach,” he says. On-premises services, he believes, will be there for the foreseeable future. They will, however, be significantly reduced from what they are today, just housing systems that banks would prefer not to have somewhere else, those critical to infrastructure or compliance.
Cost is a driver of this model too. Brune says that banks might want to migrate operations that are only used for certain roles, or at certain times of the year, such as accounting season. “Of course, cloud is useful and has the advantage to change costs, fixed and running, but it’s also a cost because the top providers want to earn a margin. So, it’s not always cheaper.” Added to this is the total cost of ownership. Brune, therefore, believes that banks will mix cloud and on-premise storage, a balance unique to each institution and one determined by their own specific needs.
A lasting legacy
Another reason hybrid models will likely prevail is legacy systems – outdated hardware or software still functioning – and the limitations they have when incorporated into modern systems. Although dating back as far as the 1970s, legacy systems in some of the world’s older banks remain critical to both the institutions themselves and the global financial market in general. After all, some estimates suggest these mainframes facilitate upwards of $2tn in transactions a day.
“I think that, for banks, this is actually one of the big challenges regarding shifting services to the cloud,” warns Brune. “Most of the core systems of all the big things are running on mainframe platforms.” Brune adds that, for years, the belief was that these workloads could be shifted to the cloud with relative ease. But over time, all of the proposals on how to do it have failed: the complexity was too great or the applications too integrated.
“Because of this,” Brune continues, “for years investments in core systems and traditional core systems have been very low. But now more and more companies are realising they have to find a new strategy to modernise systems and make them ready for moving parts of them to the cloud, or at least managing them as a part of the cloud.” The problem is there simply isn’t the skilled workforce in many parts of Europe to help manage it. Because banks have believed they could just migrate and drop ageing capabilities for newer ones, investment in skills and training never happened. All the same, Brune says that banks are gradually waking up to these challenges. “There was not much education, not much practical training on legacy technologies,” he says, “and this is a big, big issue because it is probably the prerequisite to a modern cloud strategy, or to digitalise services.”
Future Banking /
www.nsbanking.com The future is in the air
Despite the challenges migrations pose, banks are slowly but surely being enticed by the cloud. Whether that’s what they want or need is another story entirely. In February 2021, HSBC said it had moved some of its transaction services to Google Cloud, while at the end of 2020, Deutsche Bank and Google Cloud announced a partnership that would, in the words of the German bank, ‘reshape how products and services are designed and delivered’. Arguably, this change is both necessary and inevitable. Challenger banks and fintechs are snapping at the heels of the legacies, bidding for every possible client in some markets. Brune, however, doesn’t believe the threat they pose is a mortal one, at least not yet.
Even so, their rise is leading traditional banks to review what they’re doing and how they’re doing it. “The role of the traditional bank is changing to offer more of the fintech services,” Brune says. “Challengers are less about disrupting the banking industry anymore – it’s more about cooperating, providing added value services to the banks; and so, the banks turn into some kind of consumers.”
“For years investments in core systems and traditional core systems have been very low. But now more and more companies are realising they have to find a new strategy to modernise systems and make them ready for moving parts of them to the cloud, or at least managing them as a part of the cloud.”
As these developments take hold, so too will the change that is inevitably coming to legacy banks. They will have to be more agile – arguably requiring a more ‘modern’ approach. For now, though, Brune says many banks are still largely managing their own data, with migration largely in its very early stages – making the likes of Santander outliers rather than the norm.
Expanding their European digital footprint, big cloud players will bring change to the banking sector, whether it’s welcome or not. The challenge for the banks is what change do they lead and which do they follow? Brune thinks there’s room for all in the banking landscape – large or small, legacy or challenger. They will, in fact, come to rely on each other, making use of similar technologies and systems as they go. “It will be more like an ecosystem,” Brune suggests. “Big banks will be turned into providers for this ecosystem, having a lot of smaller services integrated but still operating the core systems and integrations themselves.” ●
55 $72bn
Money spent collectively by the world’s investment banks on IT yearly between 2017 and 2019.
Moody’s
Page 1 |
Page 2 |
Page 3 |
Page 4 |
Page 5 |
Page 6 |
Page 7 |
Page 8 |
Page 9 |
Page 10 |
Page 11 |
Page 12 |
Page 13 |
Page 14 |
Page 15 |
Page 16 |
Page 17 |
Page 18 |
Page 19 |
Page 20 |
Page 21 |
Page 22 |
Page 23 |
Page 24 |
Page 25 |
Page 26 |
Page 27 |
Page 28 |
Page 29 |
Page 30 |
Page 31 |
Page 32 |
Page 33 |
Page 34 |
Page 35 |
Page 36 |
Page 37 |
Page 38 |
Page 39 |
Page 40 |
Page 41 |
Page 42 |
Page 43 |
Page 44 |
Page 45 |
Page 46 |
Page 47 |
Page 48 |
Page 49 |
Page 50 |
Page 51 |
Page 52 |
Page 53 |
Page 54 |
Page 55 |
Page 56 |
Page 57 |
Page 58 |
Page 59 |
Page 60 |
Page 61
