Tony Farnfield, Partner at BearingPoint

The cloud has provided challenger banks with the key competitive edge they need over incumbent competition, a leading management consultancy has claimed.

Cloud-based systems have dominated the challenger bank market because they are cost effective, easy to adapt, change and configure, and offer the agility that banks need in order to adapt to fast changing customer demands, said Tony Farnfield, Partner at BearingPoint.

But he pointed out that not all challenger systems have been cloudified: “That might be the case for the front-end part or for card production and payment processing, but for their core banking they have either opted for traditional tech players – like Infosys, Oracle FSS Flexcube or Temenos – or even built their own platform,” he added. “Using Monzo as an example, its core banking operations have built their own platform, similar to Revolut, but the technology used is mainly open source – Linux and Apache Cassandra used as their database and Google’s Golang as their programming language. Their infrastructure is hosted on Amazon Web Services whilst for their payment production and personalisation services they use Thames Card Technology.”

Farnfield pointed out that N26 uses Mambu’s core banking system on a hosted basis: “Revolut who also went down the route of building their own technology, they not only moved this in house but they in-sourced the card issuing service too, moving away from their external supplier, Wirecard,” he said. “Starling have also developed their core banking platform and mobile apps in-house, however, these are entirely cloud-based running on AWS and Google Cloud Platform.”

He said not all challengers are going for a pure cloud model: “Starling has already done so,” he added. “They use AWS to deliver their services; primarily Amazon CloudFormation to provision and manage their AWS services and Amazon EC2 to run its applications on virtual machines in the Amazon Cloud. They also use S3 to assist with data storage and AWS Lambda to build an on-demand application. The launch of the bank in one year is very much owed to this. The use of AWS or any cloud provider for that matter not only brings down the cost of innovation but you can quickly roll out any new updates.”

by Guy Matthews
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