Technology has disrupted the banking and finance industries in ways previous generations could never have foreseen. New technologies have changed how we do traditional processes in all aspects – whether it’s making payments, investing, trading or money management.
All these technologies are fuelled by huge amounts of data – data that needs to be stored and analysed in a way that’s fast and cost-efficient.
While fintechs love to shout about implementing ‘sexy’ technologies such as artificial intelligence (AI), machine learning and high-velocity trading algorithms, they are typically less focused on data storage. It may not seem as shiny as something like AI, but fast, cheap data storage is the foundation upon which nearly every fintech application is built. Simply put, without data, there would be no fintech. Yet currently, many fintechs are unknowingly wasting huge amounts of money on how they store their data.
Why is data storage so important in fintech?
Fintechs are all reliant on the data they collect. Data fuels trading algorithms, it fuels research & development, and it provides insight and new ideas. When you think about the enormous amount of data generated every day by all the world’s markets, public companies, and financial institutions, and the fact that much of this data will be stored for years, if not decades, then it becomes clear that the technology for storing large amounts of data for long periods of time is worthy of close examination.
The data storage problem is growing exponentially as more important as volumes of data continue to surge. To give an idea of how quickly data demands are growing, a recent report from market intelligence firm IDC observed that the amount of data stored is doubling every two years and is anticipated to grow from 33 zettabytes in 2018 to 175 zettabytes by 2025.
Why hybrid and multi-cloud strategies make sense for fintechs
To deal with the data influx problem, it makes sense for financial services firms and fintechs to redesign their infrastructure using hybrid cloud or multi-cloud strategies. A hybrid cloud approach allows fintechs to keep part of their data storage infrastructure off-site whilst incorporating new cloud technologies, an attractive solution for many financial services companies which can be reluctant to keep sensitive financial data off-premises.
And now many businesses are opting for a multi-cloud approach that allows them to use multiple different public cloud providers for different applications.
A recent white paper by 451 Research showed that more than three-quarters of financial services businesses (77%) are looking to incorporate some form of cloud platform as their primary environment within the next two years. Fintechs also have the advantage here as they’re not tied to legacy technologies so it’s easier to migrate their processes – UK bank TSB’s customer migration failure in 2018, which cost the CEO his job, showcases how risky the process of migrating between technologies is for incumbents.
Reigning in the cost of storage
The big three cloud providers (Google, Amazon, Microsoft) are still dominating the market with fully-fledged solutions, but they’re not always the best option for fintechs. Egress fees, annual price hikes combined with the cost of scaling up cloud infrastructure in line with escalating storage demands can prove very expensive, and it’s not always clear how their fee structures operate.
With the average cloud budget now escalated to just under £2m, according to a survey of the IT decision-makers conducted last year, fintechs would be wiser to partner with a smaller cloud storage provider that’s cheaper, more flexible and won’t lock them into a lengthy contract.
Fintech startups have the advantage of being far more nimble than traditional financial services companies, allowing them to switch out providers and update their processes quickly. By embracing cloud storage, they can effectively tackle the huge amounts of data they’re handling without breaking the bank and significantly improve their operations, allowing them to focus on building the best product.