The digital age has changed the way financial services operate, pushing the industry to stay technologically savvy just to keep up. Still, this technology-driven shift is not without problems. Old legacy systems, tight regulations and the demand for real-time data management have put pressure on conventional solutions, making them feel obsolete. But fully photonic networks, connecting endpoints directly with optical paths, could be the answer and help the financial world remain fast, flexible and sustainable.
Chairman of the Technology Working Group at the IOWN Global Forum and leads NTT’s R&D of IOWN technologies.
The challenges facing financial services today
Technology is woven deep into financial services, but it also adds complexity. A major obstacle is performance and latency issues. High-frequency trading, cross-border payments and fraud detection all require real-time data processing, but existing electronic networks, built on copper wires and fiber optics, struggle with delays, making it challenging to meet the accuracy required for time-sensitive transactions. Another challenge is meeting regulatory requirements. Compliance with regulations such as Europe’s Digital Operational Resilience Act (DORA) is both difficult and expensive. Financial services laws require strong data protection and operational stability, but current networks can sometimes fall short. Finally, the sustainability pressure is becoming increasingly prominent. As sustainability becomes a core business objective, energy consumption from data centers and network infrastructures has emerged as a major concern, often clashing with companies’ environmental ambitions.
So what are photonic networks?
Simply put, photonics is about using light – specifically photons – to transmit data. Unlike electrical signals in copper cables or even ordinary fiber optics, photonic networks use light to transmit data directly, skipping the usual electronic conversions. The result? Faster speeds, more data capacity and far less energy consumption.
All-photonic networks transmit data as light without converting it back and forth between electrical signals. This setup reduces latency and improves energy efficiency, making photonics perfect for industries where fast, reliable data transfer is critical – such as financial services.
How photonic networks could transform economics
Photonic networks enable more predictable network paths, ensuring consistently low latency. It is a big plus for financial companies that need every advantage to remain competitive in their markets.
Complying with regulations like DORA is not easy; it requires the institutions to be very robust and flexible. Photonic networks can help meet these requirements by enabling real-time data visibility and faster data replication. This means better recovery capabilities and more robust backup strategies.
These networks also support interconnected data centers with low-latency failover capabilities, ensuring operations can transition seamlessly during maintenance or outages. This flexibility makes it easier for financial institutions to meet recovery time goals (RTO) and recovery point goals (RPO) set by regulators.
Photonics and the path to sustainability
Data centers and networks use enormous amounts of power, which is a roadblock for companies aiming to reduce their environmental impact. Photonic networks offer a solution that uses light for data transmission and avoids the energy-consuming electronic conversion steps.
By adopting photonic systems, companies help reduce energy costs by requiring less power for data transfer, ultimately reducing operating costs. Additionally, by enabling more reliable data transmission, photonic networks would allow financial services institutions (FSIs) to relocate their data centers to rural areas where renewable energy sources are more readily available. This will help these organizations to align more closely with their ESG goals without having any negative impact on the speed of operations.
In an industry where meeting sustainability targets is linked to investor confidence and public approval, this is no small thing.
Looking ahead
While photonic technology is still finding its footing, its potential to reshape finance is clear. Embracing photonic networks can help financial firms solve today’s problems while opening opportunities for innovation down the road. With better support for distributed computing, real-time analytics, and stronger data protection, FSIs can become more resilient, meet tough compliance standards, and achieve sustainability goals—all while keeping costs under control.
The financial firms that choose to invest in photonic networks now are likely to lead the pack in a rapidly changing market. With unmatched speed, reliability and energy efficiency, photonics is not only a solution to today’s problems; it is a way of future-proofing the operation, regardless of what comes next.
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