Big Four held back by legacy infrastructure
For the Big Four UK banks the situation is different. Should they wish to move core systems out of their data centre in future, the main barrier is their reliance on complex legacy infrastructure, built up over decades in many cases.
"The big banks have a huge problem because for them it is a huge project to move their core banking," Schlesinger said. "I think the only way they can do it is a build and migrate strategy and what they build should be built on top of infrastructure as a service. So over a fifteen-year period migrating core banking into the cloud.
"They'll start the process in a couple of years' time and they won't finish it for a decade. So the data centres will be there running the existing systems but on a legacy basis."
There are a number of potential benefits of moving core banking to the public cloud, alongside lower costs. The flexibility of cloud computing helps lenders move more quickly to compete with nimble finch competitors, rather than relying on legacy infrastructure. There are also benefits around security for many banks, with the hyper scale cloud providers able to employ huge teams of security specialists that dwarf the number available to all but the biggest financial firms in order to protect system.
There are also numerous options in terms of routes to the cloud - IaaS, PaaS, SaaS and public, private, managed - and these will appeal to different banks depending on a range of factors, said Schelsinger. This includes the individual bank's size and the geographies they operate in.
"I don't think all the banks will do the same things," said Schlesinger. "So for a tier one initiative, they will buy infrastructure and they will build platforms and software as service on it. That is the Tier 1 bank at home - so Chase in the US, or HSBC in the UK [for example]. But a Tier 1 bank out of geography looks more like a Tier 2 bank. I see Tier 2 banks renting platform as a service, and actually we are seeing that already in some of the RFPs we are getting.
"For all other banks, that's the Tier 3, 4 and 5, they will be buying software as a service, running very, very low entry costs."
In other news at the Temenos' 18th annual European customer event, the Swiss vendor announced an update to its MarketPlace platform, launched last year to help connect bank and fintech firm services ahead of the PSD2 regulations. Temenos has added new functions to the MarketPlace such as a Sandbox platform as a service non-production environment to make it easier to test MarketPlace services.
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