The digital age has changed the way financial services works, pushing the industry to stay attuned to technology just to keep up. Yet this technological change is not without its problems. Legacy legacy systems, strict regulations and the demand for real-time data processing have put pressure on conventional solutions, making them obsolete. But fully photonic networks, which connect endpoints directly with optical paths, could be the answer, helping the financial world remain fast, flexible and sustainable.
Chair of the Technology Working Group at the IOWN Global Forum and leads NTT’s R&D on IOWN technologies.
The challenges facing financial services today
Technology is deeply ingrained in financial services, but that also adds complexity. Performance and latency issues are a major obstacle. High-frequency trading, cross-border payments and fraud detection all require real-time data processing. Yet existing electronic networks, built on copper wires and optical fibers, struggle to handle delays, making it difficult to achieve the accuracy required for time-sensitive transactions. transactions. Another challenge is meeting regulatory requirements. Compliance with regulations such as the European Digital Operational Resilience Act (DORA) is both tricky and costly. Financial services laws require strong data protection and operational stability, but current networks can sometimes fall short. Finally, sustainability pressures are becoming increasingly important. As sustainability becomes a key business objective, the energy consumption of data centers and network infrastructure has become a major concern, often at odds with companies’ green ambitions.
So, what are photonic networks?
Simply put, photonics is the use of light – particularly photons – to transmit data. Unlike electrical signals found in copper cables or even conventional optical fibers, photonic networks use light to send data directly, skipping the usual electronic conversions. The result? Faster speeds, greater data capacity and much lower power consumption.
Fully photonic networks send data in the form of light without converting it between electrical signals. This configuration reduces delays and improves energy efficiency, making photonics perfect for industries where fast and reliable data transfer is essential, such as financial services.
How photonic networks could transform finance
Photonic networks enable more predictable network paths, ensuring consistently low latency. This is a huge advantage for financial companies who need every advantage to remain competitive in their markets.
Staying compliant with rules like DORA is not easy; this requires institutions to be very resilient and flexible. Photonic networks can help meet these demands by enabling real-time data monitoring and faster data replication. This means better disaster recovery capabilities and more robust backup strategies.
These networks also support interconnected data centers with low-latency failover options, ensuring operations can scale seamlessly during maintenance or outages. This flexibility makes it easier for financial institutions to meet recovery time objectives (RTOs) and recovery point objectives (RPOs) set by regulators.
Photonics and the path to sustainability
Data centers and networks consume large amounts of energy, posing a barrier for businesses looking to reduce their environmental impact. Photonic networks offer a solution, using light for data transmission and avoiding energy-intensive electronic conversion steps.
The adoption of photonic systems helps businesses reduce energy costs by requiring less energy for data transfer, thereby reducing operational expenses. Additionally, by enabling more reliable data transfer, photonic networks would enable financial services institutions (FSIs) to relocate their data centers to rural areas, where renewable energy sources are more accessible. This would help these organizations align more closely with their ESG goals without negatively impacting the speed of their operations.
In a sector where achieving sustainable development goals is tied to investor confidence and public approval, this is no small feat.
Looking to the future
Although photonics technology is still finding its place, its potential to reshape finance is clear. The adoption of photonic networks can help financial companies solve today’s problems while opening up opportunities for innovation in the future. With better support for distributed computing, real-time analytics and stronger data protection, FSIs can become more resilient, meet strict compliance standards and achieve their sustainability goals, all while controlling their costs.
Financial companies that now choose to invest in photonic networks will likely be ahead of the pack in a rapidly evolving market. With unparalleled speed, reliability and energy efficiency, photonics is not only a solution to today’s problems; it is a way to sustain operations for everything that follows.
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