Established FinTech Companies Face Complications in Evolving
FinTech is hot. The venture capital industry is churning out new players like coins in a mint. Many of these new companies target niches in the various segments of the financial services industry: consumer banking, capital markets, insurance, etc. And like most startups today, they are born in the cloud with all the advantages of low capital costs and flexible workloads that come with the cloud.
And yet, fintech is nothing new.
Many established companies, including large publicly held firms, fit the fintech description. These fintech pioneers helped the financial services industry use technology to streamline, accelerate and automate various aspects of their business. They’ve been around for quite some time and helped create the market that new firms now target. Unlike the upstarts, they built up a great deal of in-house infrastructure to service their clients. In many cases, their technologies are so integrated into their clients’ operations, there is a fear of disruption if the fintech supplier were to migrate to modern architectural approaches.
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Complications create barriers to evolving architectures
The new VC-backed firms do not face the same limitations. While new competitors can take advantage of micro-services architecture to create their applications and services, the pioneers are saddled with monolithic approaches. Their applications might not lend themselves to micro-services without significant re-architecting. Even a straightforward “lift and shift” migration to a cloud hosting environment is at best problematic because of potential disruptions that their customers won’t tolerate. In many cases, these applications and services are integrated into other applications such as data analytics used by financial industry customers. Customers want everything available when and where they need it, completely agnostic of the systems it runs on. They don’t want to change things because of their suppliers’ business need.
For instance, moving from an in-house data center that was specifically located to be near a financial center to a hyperscale data center across the nation could introduce latency into services that previously had very little. This could cause timing problems for complicated trading algorithms.
The sheer amount of data involved also complicates the transition. Customers have tons of data already invested in these services and collect a lot more each day. Preserving the integrity of that data through a transition is only one issue. Much of this data is active data, used regularly by bankers, traders and even consumers. By moving it into a hyperscale cloud, the fintech player will encounter egress charges when that data is used. That creates a no-win situation of either passing new costs on to customers or absorbing them into an established P&L and lowering profit margins.
Constant Partial Migration
FinTech players face an uncomfortable paradox. To continue serving their customers into the future, they need to rearchitect their services. Yet, customers will balk at any disruption. At best, fintech pioneers are trapped in a state of constant partial migration. They can merely chip away at a huge problem because only marginal, low-impact steps are available to them.
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