Banking on a hybrid cloud

Reaping the rewards of AI-powered services is putting the quality of fintech IT infrastructure to the test. By Arpen Tucker, Snr. Business Development Manager, UK, Vantage Data Centers.

  • Sunday, 14th January 2024 Posted 3 months ago in by Phil Alsop

Fintech’s are well aware of the criticality of their IT systems to deliver competitive advantage and growth. Getting it right means the agility to respond quickly to customer demands while reacting to new market opportunities with timely new products. The result, more business and greater customer loyalty through the delivery of a highly tailored customer experience in tune with their immediate and future needs.  

It's no surprise therefore that many fintech businesses are turning to new developments in artificial intelligence (AI) and machine learning (ML). To not only improve operational efficiencies but also for processing and analysing far more data than ever before, allowing super-accurate decision making based on razor-sharp AI-based intel. Furthermore, ML enables a new weapon for combatting fraud, with powerful biometrics which analyse users’ physical and cognitive behaviour.  

However, all of the immediate benefits and future possibilities offered by AI demand unprecedented compute power and a more robust IT Infrastructure. Equally, the handling of huge volumes of sensitive financial data requires specialised, highly compliant IT. Ongoing regulatory updates, such as those related to e-money, anti-money laundering, and capital requirements, require fintech firms to be agile in adapting their IT systems to comply with changing laws.    

There are other risks too. Not least, fire, flood, power outages or the fallout from a physical or cyberattack - all can take vital systems offline resulting in loss of business opportunities, customers, reputational damage and even the potential of hefty fines. 

With so much at stake, fintech companies must regularly evaluate whether it is affordable or indeed best practice to keep all their IT systems on-premises. An alternative is outsourcing IT servers and equipment into third party ‘colocation’ data centres. Backed by service level agreements, these can provide the critical infrastructure, security and round-the-clock support services necessary for keeping systems continuously available. Leveraging the cloud as well as, or instead, is a further option. But in the rush to cloud enabled services, don’t forget these still depend on the reliability, connectivity and security of someone’s data centre(s) somewhere. 

Best of both worlds

A best of both worlds’ solution could be a hybrid cloud, combining public and private clouds under one umbrella, including where required, legacy systems. 

On a pay as you go basis, this allows a fintech company to manage and scale variable workloads in the public cloud and leverage the latest AI/ML tools and technologies available to innovate and experiment with new product offerings. Apart from the time to market benefits, capital expenditure can be devoted to private cloud infrastructure for supporting workloads that can be seamlessly accessed from the on-prem or colocation data centre. Such an optimised approach allows continued control and ownership of sensitive information – a prerequisite for fintech firms – while also addressing the growing challenge of having sufficient compute resources consistently available.  

There are further advantages to taking the hybrid route. Fintech businesses will be able to seamlessly integrate and analyse public data sets and private financial data to derive valuable insights and enhance their AI-driven financial services. Moreover, critical data and applications can be replicated across both on-prem and public cloud environments, reducing the risk of downtime due to hardware failures or unforeseen events.

Changing IT infrastructure requirements 

In practice, however, whether on-prem or third party, the data centres supporting these hybrid cloud environments will need to be equipped with fit for purpose IT infrastructure, suitable cooling and sufficient power to scale and manage the increasing draw of high-density racks. They will also need highly skilled engineering personnel on hand as hybrid clouds are complex and cannot be built, tested and managed successfully without suitable facilities and training. High levels of physical and cyber security are also going to be of more importance than ever.          

But, above all, the hybrid cloud must meet user and customer expectations for application responsiveness and predictability which means placing compute resources closer to end-users and vital data sources. This brings latency and the cost of connectivity into focus both of which are critical in fintech. However, with the considerable amounts of data moving back and forth between the public and private cloud environments, few on-prem data centres will be able to afford to run the dedicated network links necessary for assuring the consistent performance of workloads that may have variable resource needs. While Microsoft, for example, offers ExpressRoute as a low latency dedicated connection, it is only available as a direct ‘trunk’ connection to certain colocation, public cloud and connectivity operators.  These can connect directly with ExpressRoute at core data centre speeds and so largely eliminate latency issues and ensure bandwidth is optimised. 

But for those on-prem or colocation data centres not directly connected, the only alternative is to find an equivalent fast and predictable connection from their facility to an ExpressRoute partner end point. As such, organisations using ExpressRoute for their own private data centre will still have to deal with any latency and speed issues in the ‘last mile’ between their facility and their chosen ExpressRoute point of presence. This is the case even where connectivity providers are offering ExpressRoute to a private or colocation facility as they are layering their own connectivity from the edge of their network and the ExpressRoute core to the edge of the user network.  

In addition, if an organisation is planning on using a colocation facility for hosting some or all the hybrid cloud environment but keeping legacy workloads operating in its own data centre, the colocation must offer a range of diverse connectivity options. Multiple connections running in and out of the facility will assure maximum performance and resilience. 

In summary, with fintech’s growing adoption of AI and ML based applications, the dilemma of where and how to maintain IT infrastructure is coming under increasing scrutiny. As they strive for greater agility without compromising the control and security of sensitive, stringently regulated financial information, many firms will turn to best of both worlds’ hybrid cloud solutions. In turn, the quality of on-prem or third-party colocation data centres at the heart of these complex environments will require careful evaluation in terms of their forwards power availability and cooling solutions, on-site engineering expertise, and proximity to public cloud provider networks for ensuring predictable, low latency and seamless interconnection of public, private and legacy workloads.