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DX Fin Serv Hero
— Blog

How to Recognize and Resolve the Hidden Digital Transformation Threat to the Financial Industry

Tony Bishop, SVP, Platform, Growth & Marketing
May 28, 2020

By now, most financial services organizations are aware of digital transformation and the urgency surrounding the need to adapt. The rise of mobile banking apps and new fintech companies are two impactful trends in today’s transformative data ecosystem. However, you can see the creation of new apps and entities. It’s what your financial institution can't see that should keep you up at night.

It’s there, it doesn’t sleep, and it’s growing. It’s called data gravity.

What is data gravity?

Data Gravity is Dave McCrory’s term to describe how increasing amounts of data generation attract new services and applications to engage with it. In his 2010 blog post, McCrory used the laws of physics and functions of IT to coin this term. He invites people to view data as a planet or another object that consists of sufficient mass. As the data continues to aggregate, it can pull a multitude of new services and applications towards it.

“This is the same effect gravity has on objects around a planet. As the mass or density increases, so does the strength of gravitational pull. As things get closer to the mass, they accelerate toward the mass at an increasingly faster velocity,” he said.

The increasing usage of data and the weight of data gravity are creating chaos for the financial services industry. Some examples include:

  • Creating continuous disruptions in centralized infrastructures of any size
  • Attracting limitless new applications and services (as it gets larger, it’s harder to move)
  • Creating density that limits data movement causing latency
  • Disrupting accessibility to end users and applications
  • Increasing costs with the higher amounts of inbound/outbound traffic

This is just the tip of the iceberg when it comes to the superpowers of data gravity and how they can disrupt a financial service organization’s sustainability as a business.

Data gravity is a challenge for everyone, but that shouldn’t provide any comfort for financial services

It’s important to note that every industry is dealing with the effects of data gravity. However, the financial services industry has an elevated level of concern over the disastrous impacts on vital financial operations, such as:

  • The ability to act on reliable data generated from investment strategy and predictive model algorithms
  • The ability to provide the demands of real-time money market advice
  • The ability for banks to keep up with consumer expectation in IoT applications
  • The ability to effectively server today’s tech-focused consumer and retain their business

For example, according to Payments.com, the “stickiness” of financial app services has customers evolving their habits from weekly usage to daily usage. Plus, Forbes found that financial apps now shape how people manage their money throughout the entire year, and customers are willing to publicly share frustrations with banks when their mobile preferences are not respected.

Also, data gravity’s explosive growth isn’t limited to one specific generation. According to a study by Jumio and Javelin Strategy and Research, every generation has mobile banking habits, especially millennials. Millennials are the fastest to leave financial service providers who don’t provide a frictionless user experience. Older users additionally want fraud prevention and information security.

While Deloitte points out that 93% of financial services believe customer engagements and experiences are at the center of their digital strategy, Gartner found that only 30% of financial service organizations are financial innovators. Many traditional financial service organizations can’t support today’s customer demands due to lack of adequate infrastructure and knowledge to address data gravity.

This not only creates a sustainability challenge; it also exacerbates the means to compete with new and existing FinTech companies. The FinTech Challenge is nothing new. As far back as 2015, Goldman Sachs estimated FinTech startups could pull as much as $4.7 trillion a year from other financial services organizations.

What compounds these problems is how data gravity contributes to accessing the right amount of data and instantly processing it before it quickly becomes less valuable. Considering its snowballing effect, you don’t want a financial organization that is too slow in stabilizing the impact on your business.

It’s not too late to take action…yet

Even if you’ve only heard about data gravity in the last few months, it’s not a new concept. The reason you hear more about it now is because of its rapid growth and tumultuous impact. The destabilizing power of data gravity continues to intensify as IoT endpoints are predicted to grow by more than 25 billion, along with the anticipated 463 exabytes of data that will be created daily by 2025.

This destabilization has enterprises making spontaneous adjustments to their IT strategy, leading to inconsistencies in global workflow management. An optimized solution to data gravity has to be rooted in decreasing complexity, increasing control and reducing risk. Our game plan for successfully addressing data gravity can be summed up this way:

Turn a colossal business roadblock into a trailblazing roadmap of sustainability.

To do this, we:

  • Focus on centers of data that improve connectivity, time and performance on a global scale
  • Strategically infuse security infrastructures where they’re needed – all over the globe
  • Dissolve the data aggregation barriers between public internet and private enterprise
  • Help decentralize your data center/cloud infrastructure to meet the increasing amount of data generated and processed away from your centralized locations
  • Equip customers with as much or as little needed to solve their needs on a global scale (including coverage, capacity, control and connectivity)
  • Offer a Pervasive Data Center Architecture that features a Network Hub, Control Hub, Data Hub and SX Fabric

We’re able to effectively power data-driven businesses because our customer needs, challenges and demands are the building blocks of our solutions. Like you, our customers are critical to our success. So, we listen and develop research-based and industry-driven solutions to specifically address needs.

Data gravity is the biggest digital transformation challenge for financial services, and we’re ready to help you meet that challenge today. Let us show you how we’re responding to data gravity’s rapid industry transformation through our PlatformDIGITAL® solution or contact us to discuss the specific challenges facing your business.