Financial services firms aim for network modernization in 2022
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3 min read . Updated: 04 Jan 2022, 05:31 PM IST Edge computing, Web3 and software-defined networks are among the priorities, IT leaders say
Financial services companies are looking to strengthen their technology plumbing in 2022 to improve current product offerings and launch new ones. This involves modernizing networks and tapping emerging technologies like edge computing and decentralized infrastructure, also known as Web3, technology leaders told the CIO Journal.
Ally Financial Inc. said it is moving to route network traffic via software, allowing it to configure cloud and data center components remotely.
Traditionally, network activity was designed to flow through physical infrastructure. Apart from being inefficient, the legacy process introduces security vulnerabilities, said Sathish Muthukrishnan, chief information, data and digital officer at the consumer bank and auto lender.
“We want to get rid of all the physical stuff and have software-defined networks that have the ability to understand the traffic that is coming in, is aware of all the different applications that have to process the traffic and will intelligently route it wherever it needs to go," with security protocols embedded, said Mr. Muthukrishnan.
Ally Financial aims to have all of its applications running on the cloud by 2025, the company said.
Payment technology company Mastercard Inc. this year is focusing on enabling faster digital payments through edge computing, a distributed computing model where data is processed and analyzed on or near the device where it is generated instead of first being sent to a corporate cloud or data center.
“It’s putting intelligence right next to our customers, all the way to the edge of the customers, within or next to the devices that they’re running," said Ed McLaughlin, Mastercard’s president of operations and technology.
The plan is to continue moving payment authorization decisions that previously would have been handled by a centralized cloud data center to the payment device, such as allowing a smartphone to unlock a subway turnstile. The technology can speed up processing—including authorization decisions—while minimizing latency, and enhancing security, he said. The technology also makes it easier for Mastercard to work with partners, who can connect directly to the Mastercard network, Mr. McLaughlin said.
Web3, a loosely defined vision for a decentralized internet that uses technologies like blockchain to give users new ways to transact, is inspiring some companies anchored in the traditional financial world to offer new types of products.
“Decentralized finance…is a subcategory of what Web3 is really about, which is data being able to speak from application to application directly," said Trevor Marshall, chief technology officer at Current, a New York-based mobile banking startup incorporated as Finco Services Inc.
In other words, users can transact without having to go through traditional financial vehicles.
“What this open data paradigm is creating is the ability for people to participate in the financial infrastructure itself," Mr. Marshall said. “One example would be where there are protocols that exist where users can actually function as lenders in the way that a bank would in previous cases."
“One of the really popular decentralized applications right now is a collateralized loan application where you can take a digital asset and you can put it in a smart contract, and that is providing collateral for other people to borrow from, and when other people borrow from that contract, you get paid for contributing your collateral," he said, describing a feature offered by some decentralized finance platforms.
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Current is exploring products based on decentralized infrastructure, although launching them is a technical as well as regulatory challenge, Mr. Marshall said. “We have to make sure we’re working hand in hand with regulators so that consumers are protected and we can roll this out in a fully transparent way."
The company also needs to “build out the pipes to turn dollars into tokens" and incorporate digital-asset transactions into its system of record, he said.
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