How financial services firms can grow through their digital infrastructure
The economy is going digital, and today’s leading financial service companies are optimising their digital infrastructure to thrive in that future.
Financial services is one of the most interconnected industries
Before the pandemic, the financial services industry was progressing through its digital transformation journey. However, when quarantine orders were put in place, there was an enormous shift in demand for digital services. This caused a ripple effect where organisations were forced to accelerate their digital or digitally enabled products by several years, instead of only a few months as originally planned.
For financial service companies, digital infrastructure is broken down into three components: the digital core, the ecosystem, and the edge. By using interconnection bandwidth and distributed infrastructure to shape and scale the global digital economy through these three components, companies are in the best position to thrive in the future.
Modernisation of the digital core
Previously, financial institutions operated on a fixed approach to infrastructure that resulted in high up-front costs and long deployment times. While it serviced their needs then, the digital transformation organisations underwent over the pandemic now makes that unsustainable.
Instead of the traditional mainframe approach, financial institutions today are leveraging hybrid cloud infrastructure, which allows them to decommission some data centres while still running certain workloads with special security requirements on-premises. By modernising their digital cores, financial institutions can leverage direct and secure private interconnection.
An added benefit to modernising the core through hybrid infrastructure is sustainability. Today, customers and investors are pushing businesses to be more sustainable. Modernising means operating within newer data centres that have been built or refurbished following the latest sustainability guidelines.
Infrastructure at the edge
Transactions must be processed near the customers and devices that are creating them. That means distributed infrastructure is key.
Business needs and customer expectations require instantaneous sale – when it comes to electronic trading, mere milliseconds in additional latency could mean millions of dollars in missed opportunities. To minimise latency, these interactions cannot all be sent to the core. With speed, security, and cost-efficiency as the driver of these interactions, infrastructure at the edge is vital as it has a direct influence on user experience. Edge infrastructure provides the ability to create redundant connections with the core. Core and edge work together to prevent service interruptions and as a result, it meets customer expectations.
On top of that, there is an added benefit of edge infrastructure when it comes to regulatory and compliance practices. With more legislation around data protection, such as the UK’s General Data Protection Regulation (GDPR) and the California Consumer Privacy Act (CCPA) in the US, there is a greater need to process and store data within specific borders. While cloud availability can be spread out and the core can be across the world, edge infrastructure allows financial institutions to abide by local laws since data is processed where customers and devices are located.
In electronic trading, firms are pushing workloads to the edge to ensure access to key markets. One example is a Japanese financial services company that deployed infrastructure in a core metro (Tokyo) and an edge metro (Osaka). With redundant connections between the locations, the firm ensured its ability to connect to partners and customers with extremely low latency and uninterrupted trading, even in the event of an outage.
Interconnection benefits at the edge are also becoming increasingly clear as the growth of enterprise edge interconnection bandwidth is now outpacing core, according to our research. In the US, Ellie Mae, a leading cloud-based platform provider for the mortgage finance industry, recently built its digital edge next to key industry ecosystems after its previous infrastructure couldn’t keep up with the growing demand for mortgage processing outsourcing and automation services. The move has helped Ellie Mae expand its SaaS collaboration application solution and interconnect even more new and existing customers.
Digital ecosystems aiding in business continuity
Without a doubt, financial services is one of the most interconnected industries. Financial services companies connect with thousands of partners and customers, from global financial exchanges to banks and payment companies connecting to credit card networks.
To ensure better business growth and continuity, organisations can level the playing field with everything-as-a-service (XaaS) and industry ecosystems, better known as marketplaces. These marketplaces can provide distributed ecosystem infrastructure in regions with a digital presence or just a high concentration of participants. Interconnection is specifically important for this aspect as multicloud and data needs continue to grow within the sector. As this continues, organisations will need to continue their ability to connect with their partners in a quick and secure fashion.
Although the financial service industry has undergone rapid digital transformation, standard cloud deployments will not be enough to help them survive in their markets. It is imperative that they embrace a digital-first strategy — making digital business and technology strategies indistinguishable. To do so, they must focus on solidifying their digital infrastructure by addressing opportunities to intersect and streamline digital core, ecosystem, and edge components of their business.
