Banks have played an important role in the economic cycle for centuries. Traditional banking activities and standard services, on the other hand, no longer provide a strong enough business case to justify this role. Banks have been under pressure for more than a decade. They must cut costs, create new business models, activate new revenue streams beyond the traditional set of financial services, and meet the needs and expectations of increasingly tech-savvy customers.
To accomplish this, banks must fully digitalize and effectively manage their data – these bits and bytes are the basic commodities of the digital age.
Previously, banks made money by charging interest on money lent. Instead of just providing money, some banks are now diversifying their portfolio of services. Consider real estate loan management: in addition to interest, some banks profit from real estate brokerage and provide a platform for additional trusted real estate services (architectural, insurance, and so on), thereby becoming the one-stop-shop for the customer’s real estate journey.
Making the evolutionary leap to become a one-stop-shop for the customer journey needs banks to become fully digitalized and interact with a broader range of stakeholders from various industries. They must also take control of the digital infrastructure they use to connect with partners and manage data. Banks require secure and high-performance direct connections to all of their partners, whether they are insurance companies, FinTechs, payment services, credit card providers, property developers, investment firms, accountants, or business consultancies.
Alleviating Risks for Reaping the Benefits of Digital Banking
Banks, on the other hand, are wary of taking risks. They desire – and are required by global regulations to have – the highest level of security and reliability in all of their digital processes. To ensure that transactions are processed seamlessly, they require the best possible digital performance with the lowest possible ‘latency’ (response time).
So, given the potential of digitalization as well as the need for risk mitigation, how can they accomplish all of this? They must bank their data with the same level of security as they do their money. They must gain control of the digital infrastructure used to connect to their entire digital ecosystem, from cloud and connectivity partners to financial services partners, vertical industry partners, and customers.
To exchange data in a fast, efficient, flexible, and secure manner, they must connect their network directly to the networks of their many partners. This is known as ‘interconnection,’ and banks must ensure direct interconnection to other networks for the best results.
The Reliable Private Party for Data Management – The ‘Closed-User Group’
Interacting with a larger group of stakeholders needs a fresh take on interconnection. The more diverse the ecosystem, the greater the demand for flexibility, reduced complexity, and compliance management. In terms of infrastructure, the bank’s ecosystem must be interconnected in a very smart, efficient, and seamless manner. This will allow you to manage the complexity of the environment while also managing compliance.
Banks already have very secure networks, which use the traditional method of connections via Multiprotocol Label Switching (MPLS) and data transport via IP transit – a combination that is both inflexible and expensive. However, once data leaves their network, it is either vulnerable or extremely expensive to protect.
For networks where the bank does not use MPLS, such as connections to clouds, applications, partner networks, and even customers, data will be routed over the public Internet, exposing it to a variety of risks.
If, on the other hand, a bank creates its own private special-interest connectivity ecosystem – known as a ‘closed-user group’ – on a secure and high-performance interconnection platform, it can bypass the public Internet and connect its network directly and securely to the networks of its trusted partners and customers, while also controlling partner compliance and ensuring high-speed, secure, and flexible access to its digital resources and enterprise-grade applications in the cloud and as a result reduces the connectivity costs.
Banks must develop an interconnection strategy as part of this evolutionary transformation. This must include ensuring continuous interconnection to internal resources. It must think about compliance and risk management, as well as secure connectivity to external partners and customer access networks. Finally, it should provide a framework for creating new revenue streams based on the opportunities afforded by such connectivity.
Developing a secure and private special-interest ecosystem on a high-performance interconnection platform is a critical step toward the future of banking.
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