Market data is the lifeblood of financial institutions (FIs) with banks, brokers, wealth managers, asset managers and hedge funds relying on quality pricing and trade-related data to power their business applications. But today customers expect to access to data on their personal devices and FIs are stepping up their digital transformation game.
Developers are demanding easier access to this data for app development, data usage is increasing, C-level executives are calling for enterprise-wide modernisation and slashing costs, and vendors and regulators are issuing complex auditing requirements. The cloud may provide the FIs with much needed relief.
Feeling pressure from all sides, some FIs are starting to move away from the traditional methods of on-premise storage and distribution of market data and migrating data storage away from their legacy data centre and moving their market data to the cloud. The cloud simplifies and accelerates access to data, eases data management, and enables advanced analytics - without the need for heavy infrastructure costs.
Finextra spoke to Stephane Dubois, CEO and founder of Xignite, who highlights that digital transformation is being driven by consumers, because they are using mobile devices to access their financial information online. However, he goes on to say that regulators are not driving digital transformation but are attempting to figure out how to cope with the management of digital data.
A recent Xignite report also details a significant shift in the financial services industry from storing market data on-premises and moving it to a cloud environment. Powerful cloud APIs are the delivery mechanisms for how that data is then distributed to the various within an organisation and even externally, to customers on their mobile devices.
Being able to access financial data from the cloud allows FIs to innovate in a similar way to fintech firms. Dubois points out that the cloud allows you to quickly build innovative solutions to meet your clients’ evolving needs. Distributing financial data from the cloud can free you from the constraints of hardware and software so that you may create, deliver, and scale applications globally, touching millions of users and devices. It is imperative that FIs understand their new relationship with data.
The call of on-demand
Despite previously being heavily dependent on the data centre, traditional FIs are being encouraged to migrate their core banking infrastructure to the cloud and use or deploy APIs that are beneficial to them, enabling them to reduce cost while driving innovation.
Dubois highlights that “cloud APIs offer much more scalability than APIs. APIs were first used more than 10 years ago as an easy way to get data, but firms were still copying the data over and storing it in their own environments. With cloud APIs, they’re so powerful and scalable that you don’t need to store the data, you can now use the cloud as your backend market data infrastructure.”
This also meets the need of the digitally-savvy customer, who is accustomed to their products and services being on-demand and available when needed. “The whole premise of the market data industry has always been replication of data,” Dubois says. “Market data was built around firms building this infrastructure, but now you can just consume it on-demand so you don’t need this infrastructure anymore.
“It means you have the opportunity to migrate your market data infrastructure to the cloud, so essentially get rid of your infrastructure and start consuming data, analysing data and everything you do with data in the cloud. That’s why it matters.”
Redeploying resources for innovation
APIs help to drive innovation through the establishment of new digital channels. This allows traditional FIs to compete with startups and leverage cloud-enabled emerging technologies, namely AI and analytics.
Dubois explains: “With legacy technology, you would spend 90% of your budget dealing with the infrastructure, getting the data together and 10% left to be able to innovate. Now, we can access this data very easily and you can really build new user experiences, new analytics, even new AI systems and models with the data.”
Most fintech startups do not struggle with migration because they are not burdened by legacy infrastructure - as Dubois points out, “they start with nothing, so they don’t have this issue of migration as much, but some do so it’s still relevant for the industry at large.
“Cloud APIs enabled fintechs and without them, they would have had to spend a lot of time building legacy and not use APIs. If they had to use legacy, they would have spent a lot of time and money on it, and not spent on innovation.”
The API design
Cost is also an important factor here, especially because cloud storage and distribution can lower the total cost of ownership. “You don’t have to acquire this infrastructure, you don’t have to maintain it, you don’t have to pay people to maintain it, because now you are using a mutualised infrastructure in the cloud. You pay for what you need and you can scale when the market heats up and you can downscale when the market is slow or closed, therefore your costs go down quite dramatically,”
Read the report here.