Factors for Financial Firms When Choosing a High Performance Cloud or Data Center Partner 

When digital transformations sweep through an industry, it’s important to evaluate how prepared the industry is to handle those changes. For some it’s easy to embrace, but for others who may have a more conservative philosophy, it can be a challenge. Banking and financial services certainly fall into the latter category, but the consumerization of banking may quickly force its hand.

We are seeing the popularity of alternative forms of banking rapidly taking hold around the world. In the UK, it’s the “challenger” banks – Monzo, N26 and Revolut – taking advantage of the Open Banking standards and rocking the establishment. In the U.S., apps and services like Apple Pay and Venmo are changing consumers’ expectations of how they control and move their money.

It doesn’t stop there. As part of the effort to modernize legacy IT systems, financial institutions have moved services to the cloud. Relying on Amazon Web Services (AWS) for a public cloud solution, or even as part of a hybrid cloud, was a reasonable first step. However, with the emergence of Amazon business loans, financial institutions could see themselves relying on cloud services offered by the tech companies they might be competing with.

What is a financial services organization meant to do? These businesses are faced with one of two choices. The first is to innovate and the second is to try and steer the direction of regulation in their favor. While influencing regulations may seem like a longer-term solution, it’s not a simple one as it doesn’t protect a business from competitors that have achieved both regulatory compliance and innovation at scale. By innovating for themselves, legacy financial organizations can help drive accessibility to their own services and act as the hub for access to the very best of innovative FinTech, for example. The development of new services or even products could not only help build customer confidence but also entice new ones.

Let’s look at one example.

Fraud detection is one area where we are seeing the specialization of HPC and machine learning play out for financial institutions. PayPal has been aggressively pursuing a security strategy that used both HPC and big data technologies. The company combines three types of machine learning — linear, nonlinear, and deep learning — to comb through over 13 million online monetary transactions per day to help identify and stop fraudsters. PayPal estimates they’ve saved over $700 million dollars in fraudulent transactions that they otherwise wouldn’t have noticed. MasterCard applies 1.9 million distinct rules to examine each of their 52 billion transactions each year to evaluate the location, spending habits, and travel patterns of the customer before each purchase is made. These machine learning applications point to a need for stronger, more deeply converged systems that can gather deeper insight from customer and transaction data.

For financial institutions considering third party cloud service and data center providers, there are a few things to keep in mind. HPC, AI and machine learning applications are extremely resource- and compute-intensive, requiring constant access to uninterrupted power and the ability to flex and expand in line with changing demand. Moving these types of applications to the cloud requires the need for specialized support and expertise – not because of complexity, but rather a deep knowledge base of how to fine tune the application to maximize performance in an HPC environment. Ideally, you’d also look for an HPC cloud provider that houses compute and storage resources in one location – as opposed to virtualized servers around the world – to further ensure optimization of the workloads and output.

Ultimately, financial services institutions and organizations need cloud providers that allow them to realize the potential of transformative market development on their own terms – both privately and securely. There is a real opportunity to embrace the digital transformation of the industry in a way that benefits these legacy financial institutions and keeps them competitive to the changing market dynamics.

Spencer Lamb, Director of Research at Verne Global.