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Finance as a Service


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From Financial Services to Finance as a Service - How Cloud will transform banking

Banks are simultaneously conservative and aggressive adopters of emerging technology, which makes them an interesting case study for cloud adoption. This presentation will begin by looking at the types of services produced and consumed in the finance industry, and how these will be transformed by the commoditisation trend that we call cloud computing. Right now the banks are dipping their toes in the public cloud, whilst starting to transform their own infrastructure into private clouds. Clearly there will be barriers to adoption, such as security and compliance. There will also be business imperatives of agility and efficiency that will push these barriers down. The conclusion will present a vision of banking in 2020, reshaped by cloud computing.

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Finance as a Service

  1. 1. From Financial Services<br />to Finance as a Service -<br />how clouds will transform banking<br />August 2010<br />Version 1.0<br />
  2. 2. Agenda<br />Cloud – yet another definition<br />Financial Services<br />Cloud Adoption 2010<br />Bank 2020<br />Recap<br />Questions?<br />2<br />
  3. 3. What’s ‘cloud’ all about?<br />3<br /><br /><br />
  4. 4. Financial SERVICES<br />4<br />
  5. 5. Market Data<br />5<br />Exchange<br />Bank<br />Market<br />Data<br />Provider<br />Exchange<br />Bank<br />Exchange<br />Bank<br />
  6. 6. Exchanges<br />6<br />Bank<br />Bank<br />Exchange<br />Bank<br />Bank<br />Hedge Fund<br />Bank<br />
  7. 7. [MTF]<br />Multi Lateral Trading Facilities(MTFs)<br />7<br />Bank<br />Bank<br />Bank<br />Bank<br />Hedge Fund<br />Bank<br />
  8. 8. Prime brokerage<br />8<br />Bank<br />Hedge Fund<br />Prime<br />brokerage<br />Position<br />keeping<br />Hedge Fund<br />Ordermanagement<br />Clearing<br />And<br />Settlement<br />Hedge Fund<br />Exchange<br />Clearing<br />Settlement<br />
  9. 9. Algorithmic trading<br />9<br />Bank<br />Hedge Fund<br />Mutual Fund<br />Algorithmic<br />Trading<br />System<br />Hedge Fund<br />Exchange<br />Exchange<br />Exchange<br />
  10. 10. Bank as a Service Bundle<br />10<br />Bank<br />Fixed<br />Income<br />Risk<br />Management<br />Reference<br />Data<br />Client<br />Derivatives<br />Client<br />Validation<br />and<br />Enrichment<br />FinancialControl<br />Clearing<br />and<br />Settlement<br />Equities<br />Client<br />Exchanges<br />Clearing<br />Settlement<br />
  11. 11. Cloud adoption 2010<br />11<br />
  12. 12. Public Cloud<br />Lots of experiments on IaaS (such as EC2) for high compute low data applications like Monte Carlo simulation (which is used a lot for derivatives pricing & risk management)<br />PaaS yet to gain real traction (but it’s newer than IaaS and SaaS)<br />SaaS is starting to find its way from low risk niche to mainstream<br /><ul><li>HR (learning management, payroll)
  13. 13. Expenses
  14. 14. CRM
  15. 15. email next?</li></ul>12<br />
  16. 16. Held back by<br />Transition risks<br /><ul><li>Confusion
  17. 17. Governance
  18. 18. Trust
  19. 19. Security
  20. 20. Transparency</li></ul>Outsourcing risks<br /><ul><li>Suitability
  21. 21. Competition
  22. 22. Lock-in
  23. 23. Second source
  24. 24. Control</li></ul>13<br />Regulation /Compliance<br />
  25. 25. Private Cloud<br />Banks use compute the same way that Aluminium plants use electricity<br /><ul><li>Economics of utility model look different when you consume at sufficient scale</li></ul>BUT<br /><ul><li>You can learn a lot from the companies that are industrialising the utilities and disrupting the marketplace
  26. 26. Book shops don’t care about the profitability of the IT industry (and neither should banks)</li></ul>14<br />
  27. 27. Industry Cloud<br />Trading venues (exchanges/MTFs) are industry utilities<br /><ul><li>Many common characteristics with public clouds</li></ul>BUT<br /><ul><li>Avoid many of the risks</li></ul>15<br />
  28. 28. What happens when the cloud becomes the prime broker for the tier ones?<br />16<br />
  29. 29. Bank as a Service Bundle<br />17<br />Bank<br />Fixed<br />Income<br />Risk<br />Management<br />Reference<br />Data<br />Client<br />Derivatives<br />Client<br />Validation<br />and<br />Enrichment<br />FinancialControl<br />Clearing<br />and<br />Settlement<br />Equities<br />Client<br />Exchanges<br />Clearing<br />Settlement<br />
  30. 30. Bank 2020<br />18<br />Bank<br />Fixed<br />Income<br />Risk<br />Management<br />Reference<br />Data<br />Client<br />Service cloud<br />Derivatives<br />Client<br />Validation<br />and<br />Enrichment<br />FinancialControl<br />Clearing<br />and<br />Settlement<br />Equities<br />Client<br />Clearing<br />Settlement<br />Exchanges<br />
  31. 31. RECAP<br />19<br />
  32. 32. Cloud is compute as a commodity<br />20<br /><br /><br />
  33. 33. Banks are compute based services<br />21<br />Bank<br />Fixed<br />Income<br />Risk<br />Management<br />Reference<br />Data<br />Client<br />Derivatives<br />Client<br />Validation<br />and<br />Enrichment<br />FinancialControl<br />Clearing<br />and<br />Settlement<br />Equities<br />Client<br />Exchanges<br />Clearing<br />Settlement<br />
  34. 34. That will be hollowed out byCloud Computing<br />22<br />Bank<br />Fixed<br />Income<br />Risk<br />Management<br />Reference<br />Data<br />Client<br />Service cloud<br />Derivatives<br />Client<br />Validation<br />and<br />Enrichment<br />FinancialControl<br />Clearing<br />and<br />Settlement<br />Equities<br />Client<br />Clearing<br />Settlement<br />Exchanges<br />
  35. 35. QUESTIONS?<br />23<br />
  36. 36. 24<br />