How the Right IT Infrastructure Can Overcome Challenges in the Financial Sector
The financial services sector’s IT requirements are massive, which isn’t surprising. When these organizations generate or operate on hundreds of thousands or millions of records per day, processing petabytes or exabytes of data every week (most—if not all—of which are of an extremely sensitive nature), then their databases, security, and infrastructure must be able to perform smoothly and seamlessly.
The size and sensitivity of this data, however, poses challenges for organizations in the financial sector. Business models are changing from those of old while regulation and compliance pressures keep mounting. Also the emergence of disruptive technologies—fintech startups, corporate ventures, and a new breed of budding competitors—all increase the level of challenge to unprecedented rates.
The right IT infrastructure can help financial services and insurance firms modernize their operations and stay competitive.
Established financial services and insurance organizations need to keep current and update their hardware & systems, tighten their security, and maintain high availability & flexibility of their IT infrastructure if they wish to stay relevant in a very competitive future.
This article outlines how the right IT infrastructure can help financial services and insurance firms modernize their operations and stay competitive.
The Challenges facing the financial sector & how to overcome them
Financial services institutions face many challenges given the size of their customer bases and the extreme sensitivity of their data. Below are some of those challenges and some suggestions that might lead to solutions.
Larger Data Volumes and Higher Data Velocity
Conventional data processing approaches can no longer keep up with larger data volumes and higher data velocity. As the volume of data sprawls upwards, so too does the management complexity, which will ultimately reflect on the IT cost of the organization, burdening human and technical resources. Greater data volumes also means more errors, which cost time and effort to fix, adding to the mounting cost of maintaining the data.
The current technology landscape offers financial institutions ways to handle issues of huge data volume and sprawl.
Fortunately, the current technology landscape offers financial institutions ways to handle issues of huge data volume and sprawl. Advanced analytics processes and tools driven by machine learning make it possible to handle immense amounts of data without overtaxing resources. This would typically require some sort of business intelligence or data analytics platform (such as Incorta), and powerful enough hardware (such as Oracle Exadata) to house it and allow it to perform at its maximum potential.
Other IT tools that could help with large sensitive databases include Robot Process Automation (RPA) and Optimization (RPO), which could free up resources from having to repeat mundane tasks and markedly reduce errors and the cost of correction.
The Ramifications of Data Error in Financial Institutions
The consequences of errors in banks and insurance companies are dire and severe. Errors in data handling could lead to customer disgruntlement or even loss, as well as bad publicity for the organization. Miscalculations, administrative mistakes, lack of clarity of insurance coverage, or other errors, can cause customers to feel wronged, robbed, not cared about or even marginalized.
And this is not only confined to developing countries. The Australian Financial Rights Legal Centre is warning consumers of widespread poor data handling throughout the insurance industry, impacting how claims are accepted or denied, according to its new research.
The right IT tools can mitigate the ramifications of database errors.
However, the right IT tools can mitigate the ramifications of database errors.
Powerful IT hardware—such as the Oracle Exadata, with its scale-out architecture, optimized in-database analytics, and machine learning algorithms—enables companies to understand end-user needs better and prevent erroneous transactions by analyzing petabyte-scale data sets in real-time.
The Money & Time Cost in Modernizing Infrastructure
Databases in financial institutions might grow to the extent that they require infrastructure upgrades. However, the high cost of infrastructure could deter those with a need to do so.
But current IT options have moved beyond traditional infrastructures with their heavy cost burden.
Organizations moving to public cloud services and cloud-native hardware/software architectures are leveraging the advantages of immensely powerful resources without the huge upfront investment costs. This can shift the expense model from CAPEX to OPEX, which can make infrastructure upgrades palatable to the business, making more room for flexible, responsive IT investments.
The Data Residency & Security Requirement of Compliance
The financial services industry is a heavily regulated field. Security standards and regulations present constraints on database operations and might have certain requirements as to data residency. On-prem requires immense infrastructure which requires a heavy financial backing to install and upgrade.
Once again, the right infrastructure can help financial institutions out on this front.
The right infrastructure can…allow maintaining on-prem data residency, secured behind the organization’s firewalls
A local cloud (through a private cloud appliance) or a hybrid cloud might be beneficial here.
Not only do hybrid cloud infrastructures reduce maintenance overhead and can drastically reduce the total cost of ownership, but they also allow maintaining on-prem data residency, secured behind the organization’s firewalls and access control protocols, to comply with internal policies and industry standards & regulations.
The New Cloud-Native, Fintech Competition
New financial institutions and services such as fintech products are disrupting the financial services sector. This might pose a problem for older institutions, as new players are exploiting the speed and agility of powerful cloud infrastructures and smart automation & optimization tools to deliver services much faster and easier than traditional institutions, all the while being to scale with zero effort.
This means that organizations still operating on traditional methods and technologies might need to shift their focus to make heavy use of cloud infrastructure if they wish to remain relevant, offering their clients their services quickly and smoothly.
How Financial institutions benefit from superior IT
There are numerous real-life examples of how financial organizations leverage their IT infrastructure to function at superior levels.
One leading multinational insurance company (with 30 million customers) uses Oracle Exadata to process their 7 billion records in 2 hours (instead of the 2 days needed previously). They were able to get an overall performance improvement of 8 times and were able to respond to pricing changes using machine learning.
Following are more examples of large organizations updating their hardware to increase performance.
Multinational insurance company (with 30 million customers)… process their 7 billion records in 2 hours [with] an overall performance improvement of 8 times.
Banco Original, Brazil
Brazilian company Banco Original underwent a huge boom in customers, growing 600% in six years, achieving a total of 4 million active accounts. Customers at that scale require round-the-clock availability and extreme smoothness in accessing and managing their accounts. And with more growth projected for Banco Original, they needed to update their infrastructure to maintain a satisfactory level of service.
Banco Original coupled the power of Oracle Database with Oracle Exadata for their core banking system to cover customer needs. This software/hardware combination allowed them to increase OLTP by up to 90% (versus the projected 30%) due to a reduction in I/O latency and persistent memory. The new speed of operations (7X their previous infrastructure) allowed them to reduce the time taken for their nightly reconciliation by 4 hours, generating more time during typical working hours to better serve their clients.
Banco Original also made use of the Oracle Zero Data Loss Recovery Appliance (ZDLRA) to automatically encrypt and back up their data, improving recoverability and data safety. This shift reduced their backup time from 48 hours to 7; a drop by a factor of 6.
Korea Credit Bureau (KCB), South Korea
Nearly all financial institutions in South Korea rely on KCB to provide credit rating evaluations for their transactions. This means that their services and data are not only extremely large-scale and essential for their organization, but are also critical for the entire Korean financial sector. Fintech alternatives also threatened to upend the traditional ways of the industry, meaning established corporations like KCB needed to keep up to speed.
This software/hardware combination allowed them to increase OLTP by up to 90% [with a] new speed of operations 7X their previous infrastructure.
KCB improved its data processing performance by 3X and cut the response time for credit analysis in half, with zero downtime and zero data loss using Oracle Exadata. They effected a massive upgrade in their infrastructure and organization’s performance, and have also strengthened the entire Korean financial industry’s competitiveness in a global marketplace.
Federación Patronal, Argentina
Considered Argentina’s leading provider of insurance services, Federación Patronal’s legacy database technologies and infrastructure were reaching end-of-life. In order to continue functioning at the elite level at which it operates, the organization needed to upgrade its infrastructure. The company migrated its key databases to Oracle Exadata, with Oracle Exadata Cloud Service for disaster recovery.
The results showed a 90% decrease in I/O latency, a 70% decrease in daily backup time, and a 50% increase in data warehouse performance.
Conclusion
Financial institutions face numerous and complex challenges. IT infrastructure can sometimes be a cause of these problems but can also provide a doorway to the solution. Not only that, with the right IT infrastructure in place, organizations can pivot their IT, shifting it from becoming a burden on the organization to becoming its greatest enabler.