Multiple trends in the banking industry are making a high-performance technology infrastructure critical to ensure success. Terry Erisman, Vice President of Marketing at GridGain Systems looks at the key challenges facing financial institutions as they become increasingly reliant on technology to stay competitive, and agile.
Real-time financial regulatory compliance and fraud prevention
Fears of another 2008-style financial meltdown and concerns over privacy have created an evolving and increasingly complex regulatory environment. To ensure compliance,financial institutions must now monitor, collect, and analyse vast amounts of data from multiple, disparate sources in real-time to calculate and report on their regulatory compliance status.
Similarly, fraud prevention requires the real-time analysis of incoming data and, frequently, the ability to apply machine learning to identify unusual activity. Fraud strategies appear in every area of financial services: from the theft of credit cards and personal financial information, to document forging and mortgage manipulation, to fraudulent computerized banking and securities trading. Financial services firms can suffer financial loss and damage to their reputations from such activities.According to Juniper Research, the problem is only getting worse as online transaction fraud alone is expected to climb from $10.7 billion in 2015 to $25.6 billion in 2020.
The evolution of asset and wealth management
Asset and wealth management services are also changing dramatically. Today’s investors typically eschew the advice of a single investment advisor and reject the idea of a limited trading day.Instead, they want their investment services providers to offer 24/7 access to trading services and an ever-widening array of real-time data that they can dive into themselves. This is requiring financial firms to update their technology capabilities and performance in order to provide real-time, high performance 24/7 access through a variety of new distribution channels, including online, mobile, and social. As more channels have been opened for customer interactions, transaction volumes have increased, and providing real-time services has become more challenging.
Support for bitcoin and blockchains
Banks, enterprises and consumers continue to adopt bitcoin and other digital-ledger technologies. A 2016 Deutsche Bank survey of 200 participants in the global financial industry found that 87 percent expect blockchain to have a major impact on the securities services market, while 75 percent expect widespread adoption over the next three to six years
Supporting blockchain’s decentralised architecture typically requiresa high performance infrastructure.When a bitcoin transaction occurs, a record of the transaction is added to the ever-growing blockchain, which must be updated in real-time. Depending on the specific application, as the size of the blockchain and the number of subscribers continue to grow, the demands on the infrastructure to maintain the real-time ledger can become extraordinary.
Spread betting is increasingly popular, especially in the UK. A spread betting platform which can accurately price wagers while providing users with the required services and access to information from multiple channels can place tremendous demands on the computing infrastructure. For instance, spread betting bookmakers and host venues must be able to stream tremendous amounts of data into advanced statistical and mathematical models that can quickly compute event relationships and outcome probabilities in order to set prices in real-time. To improve the trader experience, spread betting platforms may also want to provide customers with access to real-time data services and news analysis so traders can gain insight into trends that impact their positions.
Financial services companies are under extraordinary pressure to meet evolving customer demands, prevent fraud, and comply with increasingly complex regulations. Whilst a variety of technologies are already in use to address these challenges, many such systems are limited by the performance of disk-based storage. But overcoming these limitations is not only possible but potentially less complex, and less expensive, than perhaps believed.
Upgrading IT infrastructure to enable real-time processing can be a highly advantageous solution. By moving data from disk into memory for rapid processing across a distributed computing cluster, an in-memory computing platform which includes an in-memory data grid and in-memory compute grid can process huge volumes of data in real-time. Such a platform can scale simply by adding additional nodes to the cluster, enabling firms to keep pace with the rapidly evolving environment and increasing threats. In fact, inserting an in-memory computing layer can increase processing speed by 1,000 times versus disk-based approaches and support hundreds or even millions of transactions per second, all with minimal integration requirements.
Critically, the technology can be deployed as an in-memory computing layer inserted between existing application and data layers, allowing rapid, cost-effective deployment with limited integration requirements. On premise, cloud, and hybrid deployment options are all possible.
Misys, for example, provides financial services software, covering retail and corporate banking, lending, treasury, capital markets, investment management and enterprise risk. The company offers services that are used by 48 of the world’s 50 largest banks, and recently decided to deploy an in-memory computing platform to handle the caching of data for its new data lake-based product. It then distributed the cached data across a distributed computing cluster for massive parallel processing. By achieving real-time processing of massive amounts of trade and transaction data, the company eliminated bottlenecks, was able to begin offering next-generation financial services to its customers, and was better able to meet its regulatory requirements.
Memory costs have dropped roughly 30 percent per year since the 1960s, and while it is still slightly more expensive than disk-based storage, it offers a tremendous increase in performance and much greater flexibility to incorporate new capabilities in the future.
The benefit? A far superior return on investment (ROI), especially when competitive advantage and customer experience is taken in to account.