Without stable IT architecture financial services could face a potential systemic risk
As fintechs mature to become part of the critical financial infrastructure, the opportunities are aligned with new responsibilities: a stable and resilient IT architecture.
Fintechs are growing from challengers to an integral part of the financial industry. Millions are already entrusting their finances to the startups. Enough so, that they could become a potential systemic risk that needs to be accounted for.
“Regulators are looking more and more at fintechs because of the significance of fintechs as a factor in the financial system,” says William Fenick, Vice President for Enterprise in Interxion: A Digital Realty Company, and continues: “This does have the potential to be a systemic risk for a country, and therefore regulators are firmly keeping an eye on this.”
If a power outage or flood hits, customer data needs to be safe. And this is where the co-located data centres Interxion offers plays in.
Move fast and break things doesn’t go well with regulators. Fintechs have to keep it running at all cost – also in times of crisis. Right now, fintechs understand this in a good way. It means they are pushing themselves to become mature companies,
William Fenick, Vice President for Enterprise in Interxion
A secure partner
The fintechs space is undergoing institutionalisation right now. Fintechs and regulators are changing. But Interxion doesn’t have to reinvent themselves. For years, established financial institutions like Saxo Bank and Nasdaq have been relying on their co-located data centres.
However, over the past few years, an increasing number of successful, fast-growing fintechs have also turned to Digital Realty’s global data centre platform, PlatformDIGITAL®, to fulfill their new needs for critical IT-infrastructure. One of them being the Swedish fintech Fidesmo.
“Our biggest challenge is safeguarding payment transactions by certifying and authenticating our data storage practices,” explains Mattias Eld, CEO of Fidesmo. “Working with our customers such as Mastercard and Visa, we set out to find a partner to help us implement a secure platform that far surpassed our previous infrastructure, which had outlived our growing needs.”
With Interxion they found the industrial strength security their customers expected from them. At the same time, the co-located approach offers the scalability of direct connection to cloud providers that fintechs need to maintain their speed and agility.
Risk and reputation
One thing is being on top of compliance and security in the country of origin, while growing into new markets is a different challenge.
“Fintechs have to combine scalability with compliance, and with an infrastructure partner who works with regulators, like we do, internationalisation becomes much more seamless. It’s enough work to try to introduce yourself to new markets. You don’t want to be tripped up by technicalities,” says Fenick.
However, stable infrastructure isn’t just a question of complying with regulation. When fintechs have cracked the product/market-fit and grabbed five percent of the market, they don’t want to lose trust and credibility because of bad user experiences.
“Regulators’ penalty for not complying is getting harsh, but the reputational risk can be even bigger. Democratizing a market through clever tech isn’t enough if customers can’t rely on the service,” says Fenick.