In response to insights arrived at from data Reserve Bank of India sounded an alert to caution that there was an impending danger of a systemic risk that would impact the entire financial market because of High Frequency Trading (HFT). The manipulation was related to 90 percent orders placed in currency, equity, and other markets were promptly cancelled via algorithms. Such manipulative practices are indulged in by shady traders for favorable trading outcomes.
Need for data analytics for financial sector
India’s shift towards a more inclusive, transparent, and world class market economy underlines need for state of the art data analytics that would play a crucial role of market surveillance through risk mitigation concerned with market abuse, as well as insider trading.
Challenges of demand balancing in terms of financial market innovations will continue to be faced by regulators for the enhancement of market liquidity. Thanks to the involvement of multiple venues of trading activities and different financial intermediaries representing several asset classes, volume of data that needs to be analyzed is overwhelming.
Public clouds can play a vital role in handling compute intensive analytics workloads that need to process extremely large data volumes. Computer clusters can be instantly provisioned and dynamically scaled by businesses for batch-wide or real time data processing on large scale.
Trading strategies can be tested by members by leveraging live data feeds during actual market transactions or by accessing historical data. It would not be a financially feasible proposition to test and implement such a huge system on premise.
In addition to financial concerns, deployment of on premise big data analytics can lead to significant operational risks for smooth maintenance of the in house systems since it is difficult to locate properly trained professionals.
How BFSI segment can benefit from cloud solutions
Cloud computing has been able to act as a booster in financial sector, since major private banks including HDFC bank, Kotak Mahindra Bank, ICICI, and IDFC bank have been able to successfully implement Microsoft Azure cloud services. There is not an iota of doubt that cloud and SaaS adoption has been picking up consistently in the Indian financial sector.
It has been demonstrated by NABARD, that in heavily regulated sectors such as banking and other financial and insurance services cloud based core banking solutions can successfully empower customers across vast geographical area. Cloud solutions can also enable even rural customers to access wide range of banking services including SMS notifications, NEFT and RTGS, any branch banking and ATM services.
There have been quite a few concerns regarding safety of storing sensitive data in data centers across different global locations. These concerns had been holding back cloud adoption by Indian financial organization in BFSI sector. Introduction of local data centers by global leaders including Microsoft and IBM has propelled cloud adoption and use of SaaS applications by NBFC institutions. This has enabled Indian companies to access global services for availing local cloud services.
Growing cloud adoption in BFSI
Indian financial markets are witnessing a steady growth in terms of cloud adoption since 2014 when ICICI Lombard sifted its environment of test and environment to that comprised of seventeen applications to Microsoft Azure.
The cloud adoption has now reached a stage which has witnessed Bombay Stock Exchange adopting Microsoft Cloud infrastructure in less than six months of its launch. There are up to 100 enterprises that have adopted Microsoft cloud exchange, which are listed with Bombay Stock Exchange.
Due to regulatory past concerns in the past, adoption of public cloud by financial organizations was restricted. This was mainly due to anxiety surrounding data storage on remote global storage platforms.
However, if the recent trends are to be believed, financial organizations are increasingly adopting cloud based solutions in some or other format. This has resulted in 57 percent BFSI organizations adopting cloud in their infrastructures.
There is a huge growth opportunity in public cloud segment since only 14 percent BFSI companies have implemented public cloud. It is encouraging to note that major global cloud service providers such as IBM and Microsoft have their cloud data centers in India to cater to local organizations. Amazon is also actively developing its cloud data center in India to support Indian companies in cloud adoption.
The development has encouraged cloud adoption in BFSI organizations since these can now access local services provided by global cloud service organizations with guarantee of fulfilling regulatory, risk, and security requirements.
On their part, BFSI organizations need to implement consistent advancements by adopting agile approach to reduce operation costs as well as capital investments. Public as well as private cloud solutions can provide these organizations the right alternative to launch cost effective as well as innovative products to boost digital commerce.
In order to encourage development of essential solutions including core banking, regulators must encourage broader applications of public cloud solutions. The road towards digital banking with cost efficiency can only be constructed by implementation of BFSI oriented cloud capabilities.