Deutsche Bank to Move ‘Heart’ of IT Systems Into Google’s Cloud

Steven Arons and Nico Grant (Bloomberg) -- Deutsche Bank AG expects to ultimately replace large parts of its core banking system with alternatives powered by Alphabet Inc.’s Google, as the German lender embarks on its biggest effort yet to modernize computer systems that have hampered it for years.

The two companies on Friday finalized a cloud computing agreement under which the German lender plans to shift most of its data onto Google servers, technology head Bernd Leukert said in a phone interview. Both firms also agreed to jointly develop products including new lending offerings and retail apps.

The deal will include “applications at the heart of our IT,” Leukert said in an interview, adding that only Deutsche Bank will have the key to decrypt data it transfers to the cloud.

Cutting costs through automation and better technology are a centerpiece of the turnaround plan unveiled by Chief Executive Officer Christian Sewing last year. For Google, the deal is a step toward breaking into the growing cloud business with European banks. The business is currently dominated by Microsoft Corp. and Amazon.com Inc., a Bloomberg News analysis earlier this year showed.

Exactly how much of its systems Deutsche Bank will move into Google’s cloud will depend on “legal, regulatory and data privacy considerations,” Leukert said.

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The two companies expect to sell some technology that they develop together to other financial services providers as white-label products and split the revenue, he said.

The contract is set to last at least 10 years and Deutsche Bank expects to make a cumulative return on investment of 1 billion euros ($1.2 billion) through the alliance, Bloomberg News previously reported.

Alphabet last month unveiled an expansion of Google Pay, partnering with banks and retailers in the U.S. to offer consumers new forms of bank accounts, cards and discounts. The upgraded payment system marks the tech giant’s deepest foray yet into the U.S. financial system.