By Simon Michie, CTO, Pulsant
The fintech sector is built on data-driven innovation and has grown steadily since the financial crisis of 2008.
Now, however, they have reached a turning point as the next big advance in enterprise infrastructure, edge computing changes the financial world in which they operate. The edge is where data-processing power moves closer to the end-user or customer.
Working in combination with 5G connectivity, edge computing removes the disadvantages of location, shifting workloads to regional data centres to deliver fast, low latency responses, even with the high volumes of data needed for artificial intelligence technologies.
This has obvious advantages. Fintechs providing trading platforms for consumers, can use edge computing to enable faster and more complex mobile execution anywhere in the UK. Fintech banking apps are already sophisticated and user-friendly, but with edge computing the range of services they can offer, especially based on the user’s location, stands to grow hugely.
Up and down the country, fintech applications can use high-volume low latency connectivity with regional edge data centres. This enables the facilitation of quicker loan approvals, credit extensions, or transaction approvals drawing on historical and current customer data, using facial recognition technology to provide security and authentication. As 5G continues to roll out, such services will become almost universal. The fast-developing viability of this infrastructure is why Mastercard, the global payment giant, is forging ahead with its Next Edge network, demonstrating how edge computing is entering the financial mainstream.
Many AI-driven anti-fraud technologies also stand to gain hugely, using low latency data processing to detect anomalies or suspicious behaviour in near-real-time. The burden of compliance with banking regulation (and data sovereignty laws) is also set to become easier through deployment of AI-based solutions that rely on edge computing.
It is for all these reasons that market research company IDC estimates global cloud spending by banks will increase by more than 16% per year up to 2024, hitting $77bn annually.
Fintechs need the edge to accelerate innovation
With banks investing heavily in edge computing, fintechs need to carve out their niches to accelerate innovation. Competitiveness is no longer just about attractive loan rates or current account interest – it’s about providing a great experience. Fintechs need the ability to react swiftly to events such as pandemics, imposition of financial sanctions, sudden interest rate rises or new opportunities triggered by changes in the law or relaxation of regulation. For the most part cloud-natives, they already have the advantage of more flexible infrastructure than their established rivals, customers, or partners in the banking sector, who still have many critical applications and vast datasets unsuited to the cloud.
But in a future that will require deeper use of AI, the integration of crypto-currencies, cardless payment platforms and non-fungible tokens (NFTs), the edge is a necessity. The focus for many fintechs, therefore, will be on the kind of edge infrastructure they should adopt.
Moving out to the edge
There are several different edge computing configurations that can be daunting for any organisation considering how to shape edge infrastructure. What remains obvious is that there must be a regional data centre capability with fast connectivity to and between the major cloud providers’ hubs in metropolitan areas, supported by low latency 5G transmission to end-users, which means devices used by individuals. Whether serving the retail, commercial or investment market, fintechs still must provide services to human beings, who demand a slick interface and total reliability. For mobile applications, this means providing the same quality of experience in Aberdeen as in London Docklands.
At the same time, the data that the device, application, or endpoint must transmit to the hyperscalers’ compute or storage capacity must also transit in the fastest and most cost-effective way possible.
In the UK, this requires a network of data centres with a good geographical spread of sites, providing maximum coverage and fast, seamless connectivity. As fintechs, along with their banking or enterprise clients embrace 5G, they should realise that digital transformation in finance outside the major metropolitan areas will also require more than fast, high-bandwidth connectivity. Transformational fintech applications will require true edge capabilities so they can spread their remarkable benefits to the full length and breadth of the country.
A purpose-built edge platform with genuinely national coverage, low latency, route diversity and the organisational agility to adapt and innovate is an essential requirement, alongside 5G, whether in a private or public network.
Removing management complications
The established banks are now thinking very hard about implementing hybrid cloud strategies, placing data and workloads where they work best and are most cost-effective, whether on-premises, in colocation, or with the hyperscalers such as AWS and Google. Increasingly, they see edge computing as part of this hybrid infrastructure. Fintechs must not be left behind or be limited by their choice of edge infrastructure partners, either through vendor lock-in or through the difficulties of managing increasingly complex hybrid deployments.
Fortunately, the arrival of a new generation of cloud management platforms has transformed implementation and management across hybrid and edge infrastructures. Fintechs can gain the full flexibility and innovation of edge computing while maintaining access to the most sensitive data and workloads in secure locations, if need be. The more advanced edge platforms are in any case compliant with payment card industry (PCI) data security and encryption standards as well as the EU and UK data protection and sovereignty laws. They may also comply with the US’s SOC 2 requirements governing the confidentiality, integrity, and privacy of customer data.
All of these points are important considerations for fintechs standing on the brink of edge computing. What is vital too, is that when fintechs commit to the edge, they ensure they have genuinely national and resilient low latency coverage with rapid connectivity to the major hyperscalers metropolitan hubs. By making the right choices and selecting the right edge partners they can continue to innovate and transform the many different ecosystems within banking and finance.