Financial industry has been through tough path post 2008 recession. It went through gigantic turmoil, and its on a restructuring phase. One of the foremost industries to adopt Information technology is Financial sector. Although most companies are adopting to Cloud at a faster pace, the financial sector remained an exception. Selling cloud computing to financial services firms could seem problematic. The sector is renowned for its reluctance to give up control over operations, which is exactly what is involved with the cloud. Added to this is a mountain of regulation. However due the restructuring and re-evaluation of process and focus areas at the financial firms is helping the intrusion of cloud based services into the Financial sector.
Let us look at a recent innovation in this space. One the most foremost successful cloud service has been started by wall street for the FX market (Foreign exchange), which is called as ESN (Electronic Settlement Network) Volume growth for FX market continued unabated while financial markets were in turmoil over the credit crunch. The tier 2 and tier 3 banks have less margin in FX market because of the higher cost on per transaction. This would really curb the them entering into the segment. This made the volume on demand, for all the players of FX market big and small by creating ESN.
Let us take a bank “X” which is tier 1 bank and bank “Y” which is a tier 2 bank. Both were severely affected by the credit crunch. They started looking for operational efficiency and newer ways to improve there business operations and improve there business in those areas where the financial sector is not severely affected. FX (Foreign Exchange) has been place where the banks were targeting to improve there business in. The Bank “X” and Bank “Y” found Electronic settlement network as an option to improve their FX market which has volume trading and has got all the advantages of SaaS usage.
So, Bank “X” being tier 1 bank entered into huge volumes of FX, Cash and OTC (over the counter) derivatives without enhancing the existing IT infrastructure and operational expenditure instead opted for the On-demand ESN. For Bank “X” ESN provides a trade Capacity “insurance policy” and during periods of high volume, banks can switch a percentage of their post-trade activity to ESN to reduce queues in their own infrastructure. ESN helped the Bank “X” to go for high volume trading, but removing the overhead of planning for huge network and infrastructure improvements and getting into the pay per use ESN from Wallstreet.
Bank “Y” had to invest a lot for per transaction on FX trading, and being a tier 2 bank they were not going for high volume trading. So they needed a third party which can lower the per transaction cost on FX trading which ESN was the there exact solution. ESN enables the smaller banks to reduce processing costs and allow them to get into the market without establishing there own infrastructure and also providing cheaper per transaction cost on FX trade for there comparatively lower volumes. Now Bank “X” and Bank “Y” go to ESN as a single place to collectively process for its members with associated economies of scale, introducing a transaction based model for processing FX, Cash and OTC (over the counter) derivatives. The utility provides capacity, functionality and operations on demand and sets the benchmark for the lowest trade processing costs in the industry.
We strongly believe, This phase is just a beginning once the design for privacy concepts come up to level of building the cloud computer services the financial sector will move into the area of getting things into being with cloud advantages. There are legislations which are coming for cloud computing, which would definitely help to have far better SLA’s for Financial sectors, which would protect and understand the needs of Financial sector.
Imaginea has a strong understanding of cloud computing, its implications from a technology stand point, security and privacy requirements in a on demand computing environment. Over the years Imaginea has also been a strong technology services provider for some of the best names in the BFSI sector. We think we are thus positioned uniquely to help leverage our unique combination of technology and sector understandings to help companies in this space innovate more.