The instantaneous availability of compute power in the cloud is supporting an explosion of data consumption in the financial services industry. In order to manage the vast amount of information in competitive and fragmented markets and derive actionable insights, a new approach to data management is essential. And financial institutions (FIs) are increasingly looking to the cloud.
For instance, they are aggregating data and making it more readily available for artificial intelligence (AI) and machine learning (ML) as well as experimenting with new applications and use cases such as trade discovery and surveillance. Additionally, regulations like BSBS239,
MiFID II and FRTB are forcing FIs to store, report and interpret deep data points from a number of different systems and of differing levels of trust, standardisation and openness.
Finextra spoke to CEO and co-founder of TickSmith, Francis Wenzel, about the software company’s recent report ‘Optimising Data Management in the Cloud’ and how FIs are leveraging cloud to solve their big data conundrum and address the unpredictable nature of data.
A new breed of platform
It is estimated that “90% of the data that exists today was created in the last two years. For FIs, this means more financial data to manage, making timely access to accurate and usable data mission critical.
Wenzel states, “Capital markets is the first data economy, and the exchange of information to conduct trading has always been a huge driver of innovation. That continues now as solutions architected for the cloud help institutions monetize information more quickly and cost-effectively, while meeting the high security requirements for managing both public and private data.”
Managing data used to be done with relational and time series databases, but those were never designed to handle the volume of data seen today. The near limitless of cloud has created a new breed of data management platform that is defined by its elasticity, speed, security and cost efficiency.
“Moreover, the promise of AI and ML is becoming a huge driver in setting up infrastructure that can scale. In capital markets, having the right technology is a do or die scenario,” says Wenzel.
From obligation to opportunity
FIs typically approach data migration to the cloud from a risk standpoint as their highly trained security and compliance groups are tasked with understanding and implementing controls in the cloud. As regulations increase in number and complexity, FIs are working with more data and leveraging cloud to do so, especially as many now perceive cloud to be as secure or even more secure than their on-premises infrastructure.
But they don’t have to stop there. According to Wenzel, “Cloud brings more capacity and agility, which can help ease compliance, but institutions should also take advantage of these benefits to create new opportunities. Good risk management can also be good business practice. As they look to differentiate from competitors and future-proof their business, focusing on data exploration in the cloud will be essential.”
Some FIs are already using cloud solutions to unlock the value of data in new ways. For instance, CanDeal is a consortium of the six largest Canadian banks that is sharing private data on a common infrastructure, because the individual institutions recognize the cost savings, operational efficiencies and viability of the cloud.
Advantages of the cloud
Wenzel states that the first and foremost advantages of the cloud are economic. FIs can reduce costs dramatically by transitioning from their on-premises infrastructure.
He elaborates: “You get more computing and storage at a cheaper cost. You have the ability to scale up and down, but fundamentally for you to get those economies to scale, you must have technology that was architected from the get-go to leverage all the tools available.”
The question for FIs then becomes whether they build cloud solutions in-house or work with a trusted software vendor. Wenzel believe that tried and true technology is usually the better alternative to reinventing the wheel.
“When the CME Group needed a big data platform, it chose TickSmith’s solution, which runs on AWS, to normalise and centralise more than 750 terabytes of historical market data. Our technology scales infinitely and helps customers customize a platform exactly as they need it in less time and at a lower cost than it would take to build the infrastructure on-premises,” Wenzel says.
“The cloud is not separate from the infrastructure of a firm, it is an extension. As more firms realise that and increase their in-house expertise, I don’t think we will refer to computing as anything other than cloud,” Wenzel predicts.