To be fit for the modern world, banks and other financial service providers need to reduce their costs, develop new business models, activate new revenue streams beyond the standard set of financial services, and meet the needs and expectations of increasingly tech-savvy customers. They need to achieve full digitalization. To achieve this, it is necessary for banks and financial service providers to take a different approach to managing their data—these bits and bytes are the basic commodity of the digital age. These institutions need and want to become the moderator of their customer’s entire financial life-cycle, across multiple sectors and value chains. This means that, as part of their journey towards transformation, they need to develop an interconnection strategy.
An interconnection strategy will provide a framework for considering the ways in which the bank wishes to control connectivity with its own digital resources, its partners, and its customers. It is worth breaking this process down into manageable steps in order to test, to gain experience, to understand the benefits of gaining control over the bank’s interconnection infrastructure, and to develop a long-term strategy. The following four-step process will help financial institutions to develop their interconnection experience and build their strategy.
Starting with the basics – how interconnection helps IT systems to work efficiently and effectively
Before even thinking about the outward-facing systems, the first essential step is to ensure that internal systems are functioning effectively. Connections to cloud resources and applications like Microsoft 365 and Microsoft Dynamics for CRM and ERP systems must be seamless, high-speed, secure, and redundant – so that whatever happens, you still have access to your data and workloads.
Traditionally, cloud resources are accessed over the public Internet, with all the risks that this entails. By making use of a cloud exchange through a secure and high-performance interconnection platform, on the other hand, it is possible to connect the bank’s network directly with the cloud provider’s network, bypassing the public Internet. This strategy has multiple benefits: not only is the connection – and thus the data travelling through it – protected against malicious attacks against its resources, but also the direct connection means that the data doesn’t have to travel so far. Because the further data needs to travel, the slower the response time will be, causing the lag that we sometimes experience on long-distance video calls and conferences, for example. We call this delay – the time it takes for a data packet to travel from a device connected to the Internet, such as a smartphone, to a server in the Internet, and back again – “latency”: The lower the latency, the faster the response, and the better the performance of cloud applications and ultimately the user experience.
This is the case for accessing data in the cloud and using applications like video-conferencing systems, and becomes even more critical when it comes to processing transactions. Artificial intelligence applications, such as customer service bots or solutions for AI analytics and process automation, are further applications that need to be sourced from the cloud – and are extremely latency-sensitive. Therefore, direct interconnection to cloud resources and applications is the foundation for progressive digital transformation. Latency truly is the new currency when it comes to the future of banking.