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Why finance organisations must transform fast to fend off competition

Why finance organisations must transform fast to fend off competition 43

Why finance organisations must transform fast to fend off competition 44

 

By Mark White, Senior Manager – Financial Markets and Fintech, Telehouse Europe

Banking and financial service enterprises increasingly understand that to achieve their business objectives and stay ahead of the competition, they need to focus on providing the best customer experience and on driving operational efficiencies,

Unfortunately, for many that is difficult to achieve. Traditional incumbent banks and financial institutions, in particular, often don’t have the right systems in place to manage, or effectively use data to respond as quickly to market changes or customer needs as their ‘digitally native’ peers, including challenger banks and ambitious fintechs.

According to research from Telehouse Europe, surveying the views of 250 UK enterprise IT decision-makers in across multiple industries, 42% of financial service enterprises believe they need to transform their IT infrastructure or risk becoming less competitive – a figure significantly higher than the 34% average across the other sectors polled.

Pressure on financial services is being driven by a range of factors, including customer demands for more connected, relevant and personalised experiences; the need to simplify business and operating models to increase efficiency and the necessity to deliver new applications and services to customers/

Assessing the challenge

It is clear financial services firms have a need for transformation, however, the path to get there isn’t always simple. And many businesses are still too reliant on inflexible, legacy on-premise infrastructure which is hampering progress.

According to the research, financial service enterprises have the lowest amount of IT infrastructure currently outsourced in colocation and the cloud. So, it is not surprising that finance firms also have the lowest confidence levels in IT maturity of all the surveyed industries, with less than a third of IT decision-makers describing their IT maturity as very advanced.

Delivering transformation in the financial services sector has historically been very difficult. Financial services firms have struggled to adopt new technologies and meet growing customer expectations quickly, often limited by strict compliance and regulatory requirements, which ramped up after the financial crisis of 2008.  There is no doubt that the Covid-19 pandemic has accelerated digital transformation in the financial services sector, especially with many employees moving to remote work and many customers moving to digital modes of payment. But with the pressure of time bearing down and the need to deliver personalised, connected, and reliable experiences an ever-urgent concern, no financial services firm can afford to stand still.

Having a robust infrastructure strategy in place is essential for the finance sector to improve efficiency, productivity and competitive edge.

Why enhanced connectivity matters

As customer demand and internet consumption levels accelerate, the financial services sector must focus on enhancing connectivity between offices and countries as well as strengthening the user interface on customer-focused technology like websites and apps.

In this context, the advent of 5G is having a significant impact, delivering a raft of benefits for financial services firms including reduced latency, which will in turn help decrease transaction and settlement times. Growing uptake of advanced AI will also enable firms to keep up with their nimble fintech rivals in delivering the kinds of improvements in the user experience that customers are increasingly crying out for.

All this activity will, however, inevitably lead to a rise in data volumes which in turn will put more pressure on backbone networks.  According to the survey, one-fifth of IT decision-makers from financial service firms already say that data volumes have become a serious problem. To succeed, organisations must rapidly ingest and process data and this depends on having a connected, secure, scalable, flexible, resilient and low latency IT infrastructure.

Ultimately, though, more connections means more risks. So, the challenge is how to take advantage of increased connectivity without compromising security or compliance.

The role of colocation

Many firms are now turning to colocation to deliver the extra capacity and bandwidth required, while also facilitating fast, secure and direct connections to cloud service providers.  

Currently the finance sector is outsourcing 38% of IT infrastructure in colocation, however, the research suggests this is expected to increase to 42% by 2026. While behind other sectors, this trend is likely to likely to be driven by rising data volumes and the impact of the pandemic. In the longer term, we would expect the adoption of colocation to continue to grow also, particularly because of the huge potential for applications around big data and 5G networks and IoT.

By hosting their IT infrastructure in a colocation data centre, firms can control the migration process, stay on top of regulatory demands, and keep a lid on costs. The top drivers of investment in colocation are sustainability, faster data access and improved connectivity, likely driven by the requirement to improve customer experience and connect disparate hybrid IT structures.

More important, by implementing a mix of cloud and colocation strategies, financial services firms can create a resilient, secure foundation for growth. This will allow them to flex and scale operations when developing innovative offerings to meet future demand, while also providing customers with a responsive, high-performing service. And by choosing a colocation facility near to financial markets and exchanges, organisations also reap the rewards of reduced latency and faster data processing to facilitate real-time big data analysis.

The edge opportunity

Despite lagging behind in other areas of digital transformation, the finance sector, along with healthcare is leading the way when it comes to edge implementation, with 72% of those polled having deployed an edge strategy. This is driven by the need to optimise data volumes, match competitor capabilities and digitally transform.

Given that it’s now increasingly important for financial services firms to store, access and analyse large data volumes at record speeds, growing intertest in edge computing is understandable. Gartner predicts that by 2025, 85% of infrastructure strategies will integrate on-premises, colocation, cloud and edge delivery options, compared with 20% in 2020.

Successful edge strategies are underpinned by colocation and cloud services, both of which are key building blocks. Ultimately, the key for success for financial services firms will be building the right infrastructure foundations and connectivity, and the right data centre partner is critical to achieving this.

Digital transformation matters

The financial services sector now has a huge opportunity to provide the seamless, secure and personalised services that today’s consumers desire and expect. But in doing so, financial enterprises must push forward with their journey of digital transformation, and this needs to happen quickly. Those that can build a well-connected, secure, reliable, scalable, resilient and low latency IT infrastructure will win the race to the connected future and drive up competitive edge.

 

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