The banking industry is accelerating its digital transformation, thanks to rivalries from a new breed of financial technology companies (FinTech), the market’s expectation for more open banking, and a rapidly evolving and broadening digital payments ecosystem. Banks must offer more comprehensive digital services to respond to these trends and to proactively position their organizations for increasing competition. Digitization will also help banks offer more personalized services to enhance the customer experience and to strengthen their relationships with their customers, which is vital in a diversifying industry.
However, banks will not be able to implement robust digital services on legacy infrastructure that was designed to handle infrequent customer transactions from within a bank’s portal. Banks need end-to-end network infrastructure that can accommodate multichannel digital services, handle dramatically increasing data flows, and adapt in real time to meet sudden fluctuations in demand—all while meeting stringent requirements for low latency, high-availability, privacy, and security. This article summarizes key trends influencing digital banking, the impacts on IT, and how banks can use data center interconnect (DCI) technologies to support new retail and commercial digital banking services.
Three Digital Trends Impacting Bank IT Systems
1—FinTech: Banks are facing an Uber-like disruption from FinTech startups that offer customer-centric, web-based financial services. To turn this challenge into an opportunity, banks are making streamlined, personal services available via multiple online and mobile channels as part of a wider omnichannel strategy.
Impact on IT: As banks adopt fintech strategies, they’ll need to make sure their networks can handle the increased customer traffic and they’ll need web-scale networking between data centers to react in real time to changes in traffic demands.
2—APIs: To facilitate innovation and benefit from nontraditional partnerships and channels, banks are opening up their systems with application programming interfaces (APIs) for use by third-party firms. APIs also enable third-party providers to aggregate connections to multiple banks and financial services firms to give customers personalized dashboards that connect to a variety of banking services.
Impact on IT: Delivering these capabilities may require a greater degree of interconnections within a bank’s own data centers and to external facilities including multi-tenant data centers, data centers that host cloud providers, and financial exchange points (hubs) that interlink all the financial resources in remote data centers. The connections need to be flexible, optimized, secure, scalable and highly available.
3—Digital payments: A revolution is underway in the payments industry. Real-time transactions, available in many countries, are expected to become mainstream in the coming years. Cash has become less necessary worldwide as credit cards, debit cards, online services, mobile wallet platforms, and even mobile messaging applications handle more of society’s monetary transactions.
Impact on IT: The increased traffic and aggregated data flows from digital payments place new demands on bank data center interconnections. The infrastructure needs to support these demands while ensuring that all financial activities are secure.
A Holistic Approach for Digital Banking Infrastructure
As banks ramp up their digitization strategies, they will need holistic networks of hardware and software technologies that can fulfill the most demanding connectivity requirements end-to-end while increasing IT efficiencies and reducing costs.
Data center interconnect (DCI) technologies, which carry content to, from and within data centers, can be implemented by banks to provide the foundation for digital services and sharing data with the partners in their ecosystems. DCI solutions can deliver multiple channels of 1-100 GbE connectivity to banking facilities and add capacity dynamically—at web-scale—to meet sudden increases in data center traffic. DCI technologies can ensure that a network always meets service-level agreements for throughput, high availability and minimum latency and that it provides Federal Information Processing Standard (FIPS)-compliant encryption. DCI also facilitates rapid storage, backup, mirroring, and recovery if there is a failure.
Customer-premises equipment (CPE) can be deployed strategically to bring carrier-grade Ethernet services to bank facilities. Banks can use CPE solutions to provision services within their facilities and to establish end-to-end connections to data center infrastructure. CPE devices can also integrate software-defined networking and network functions virtualization (NFV) to automate provisioning, virtualize firewalls, encryption and other functions, and segregate and secure traffic for different departments, applications, or customers depending on business-specific or regulatory requirements.
Software-defined networking (SDN), implemented end-to-end, enables banks to manage and control their networks in self-service fashion and automate their entire networks to get the most benefit from their infrastructure. With SDN, banks can get their connectivity up and running quickly and allocate bandwidth dynamically. The approach eliminates the complexity of service deployments while minimizing the potential for error associated with manual setup and configuration.
Network functions virtualization (NFV) enables banks to accelerate, automate and simplify the deployment of routing, firewalls, encryption and other network functions. NFV also simplifies network management and maintenance and reduces equipment and energy costs. Best-of-breed virtual network functions (VNFs), including routers, firewalls and encryption, can even offer machine learning that can improve security by detecting threats and reconfiguring a system or information flows to protect the network.
Privacy by design is extremely important in banking networks, given the sector’s attractiveness to hackers, the risk of cyber threats, and penalties for data breaches. Banks need to implement security holistically, not simply at the perimeter of their networks, to keep data secure the entire time it’s in transit without impacting performance. The best approach for protecting in-flight data is to deploy FIPS-compliant encryption to secure data center interconnections and CPE devices. Network solutions can also isolate and separately manage traffic as needed to meet banking industry regulations or other laws that apply to specific applications or types of traffic.
Edited by Maurice Nagle