You've probably heard Benjamin Franklin's famous quote "time is money," but nowhere is its truth better revealed than in modern financial networks, which have been built from the ground up to reduce latency and boost profitability. Every decision related to their design, from where each electronic trading platform is located to how its TCP/IP stack is set up, is influenced by the goal of lowering latency, especially for high frequency trading (HFT).
Even outside the uniquely demanding environments of HFT, similar considerations about latency, packet loss and jitter inform the architectural choices of all financial services provider wide area networks (WAN). For example, just a slight increase in packet loss will dramatically reduce throughput, degrading the experience for employees as well as the customers they serve, according to NetCraftsmen.
SD-WAN in Finance: A Key Piece in the New Performance Puzzle
With that in mind, let's look at the specific software-defined WAN (SD-WAN) benefits for today's financial institutions. SD-WAN offers a comprehensive solution for more reliable, agile and cost-effective services, even as business models evolve and new challenges such as blockchain and the Internet of Things (IoT) enter the picture. It can deliver:
Cutting-Edge Branch Operations
The various HFT optimizations we mentioned earlier represent just one side of how financial network WANs are customized for speedier performance in finance. Via SD-WAN solutions, these adjustments make pay off in the form of enhanced consultative and advisory operations at branches.
There has long been debate about the decline of bank branches. A CACI study projected bank branch traffic would decline 36 percent from 2017 to 2022 as mobile banking replaced many of the essential branch functions. However, DepositAccounts has estimated the number of branches per institution actually rose from 2004 to 2016 amid industry consolidation.
Overall, branches remain pivotal in the delivery of specific products such as auto and home loans. Instead of placing dedicated staff at branch offices without the budgets or foot traffic to justify them, many banks and credit unions have turned to telepresence instead. Video conferencing and augmented/virtual reality applications will continue to redefine these experiences.
SD-WAN can ensure their viability by tapping virtually unlimited bandwidth pools supported by commodity Internet links. Plus, its path and session layer intelligence enable quick adaptability to congestion that would otherwise jeopardize performance, not to mention customer satisfaction.
Future-Proofing for Blockchain and IoT
Both blockchain and the IoT present significant challenges in scaling. These obstacles threaten to reduce the utility of new digital currencies and IP-enabled devices for financial institutions:
- For example, the average Bitcoin transaction takes 43 minutes to clear. Cryptocurrencies in general struggle with widespread adoption and with the protective services consumers are accustomed to with their payment cards.
- The financial IoT could encompass billions of devices designed to enhance credit assessments, insurance policies and much more. But performance and security issues, highlighted by the recent KRACK exploit in WPA2, remain front and center.
While an SD-WAN alone will not solve these problems, it offers a more resilient and future-proof foundation for the network. Its compatibility with any type of transport, along with immersive connectivity that is both link and carrier agnostic, combined with its security integrations and its WAN link intelligence, provide a smooth trip for key application traffic, with risk to low latency, packet loss and jitter mitigated. Learn more by scheduling a demo today.