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Why the financial services industry is banking on the database-Magazine

Perry Krug, Couchbase principal architect

Perry Krug

Perry Krug

There’s no doubt about it, over recent years the financial services (FS) space has undergone a colossal shift thanks to new regulations, a more global customer base and pressure from watchdogs and consumers alike to be more transparent yet secure. As the size and value of the industry continues to increase, as evidenced by the explosive growth of fintech, the challenges facing businesses operating within the space will continue to be shaped by technologies at both the back and front end. Ergo, as banks continue their digital transformation efforts and adopt new technologies, their choice of database is becoming increasingly significant.

For a prime example of how technology and regulations are shaping the financial services industry, take the growing issue of fraud.Today, fraud costs the global economy billions;£193 billion in the UK alone year. As a result, fraud detection has become essential to businesses of all sizes,not only for meeting international regulations but to satisfy customer demand for reduced risks.

What do growing digital threats and opportunities mean to IT infrastructure?

On the back-end,financial institutions need to support thousands of trades per day,all happening in real-time across the globe. Banks, building societies and brokerage firms must be able to consolidate, distribute and store the data that comes out on these trades instantly.Not to mention scale during particularly slow or busy periods.As a result, the FSindustry has found itself having to make huge infrastructure changes to support its modern business requirements.

Increasingly, these businesses are finding that traditional database technology is no longer able to support the real world demands of modern day finance. The volume and variety of data, from countless sources, presents both challenges and opportunities to FS companies as they look to take advantage of digital products and services, and respond to the demands of customers who want to do everything online, on mobile and on the go. The key to success will be how FS companies choose to manage their data. As a result, the selection of the right database has quickly become a decisive factor when it comes to processing, accessing and evaluating structured and unstructured information. While the database is rarely thought of in the same terms as blockchain, P2P lending or whatever the latest en vogue technology in finance may be, it is the cornerstone on which banks can build their digital transformation programmes.

What are the database options?

Going back to the issue of fraud, effective fraud detection requires an FS organisation to process a huge amount of customer purchasing data. With the help of detection algorithm rules, customer information, transaction information, location and time of day data,banks can quickly and effectively pinpoint transactions that appear to be out-of-character. However, in order to sift through this data, regardless of seasonal peaks in purchasing or time of day, FS companies must have a database with low latency and huge scalability.

At the same time, the database is also key in solving issues of replication, content management and real-time availability of big data. Choosing the right database will allow theFS industry to move with the times without the worry of detracting from it score offerings or requirements. Instead, businesses need to support their growing data requirements with flexible and scalable data management solutions to increase and maximise their profits with minimal investment.

Banks will always use traditional relational databases throughout their IT infrastructure, where they can function as valuable systems of record. In a digital economy, however, where the end-customer experience is everything, banks will increasingly look to create and integrate IoT, mobile and AI applications. These apps require a database to match, which can also function as a system of engagement. This is where non-relational (NoSQL) database technology enters the market. Unlike traditional relational databases (SQL), NoSQL is particularly well suited to tasks that require fast access to data, from a variety of sources as well as systems that can adapt to changing market conditions. Not only can NoSQL databases scale out at a moment’s notice they can resolve issues of data management with little cost in terms of time and budget.

It all comes back to data and being able to get the most value from it. As such, the ability to perform accurate, real-time analysis has become vital to both compliance and competitive success. In this environment, the winners will be those banks that remain compliant, while ensuring customers don’t want to leave because they receive the best possible experience. Analysing and acting on customer data near-instantaneously will be critical to providing this,as will choosing the right database, which should be the top technology priority for all banks hoping to keep pace with agile fintech competitors and would-be disruptors.

“Original publication in Finance Digest Issue 1
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