How financial services can benefit from edge computing

As the global financial transformation gains full speed with agile digital services setting the new norm, low latency, security and reliability become top priorities. In this highly digitalized financial landscape — driven by traditional finance organizations and new fintech startups — edge computing gives companies the speed and flexibility they need to gain a competitive advantage. Thanks to edge computing, companies can leverage new innovations like AI, 5G, IoT, biometrics and the blockchain.

Edge computing can create more advanced and hyper-personalized customer experiences, enhance cybersecurity postures, bring down costs, meet regulations and laws, and drive operations in the blockchain. In this report, we dive into the benefits and risks of edge computing to understand its potential and how best to deploy and manage the edge.

Jump to:

Big data and the customer experience

From CCTV to ATMs and branch data to personal transactions, financial institutions process significant amounts of data daily. If we add the transfer of data that takes place as financial services digitize, the result is overwhelming.

Edge computing, combined with the right tools like machine learning models, artificial intelligence, and data management and governance, can provide highly personalized and customized experiences. Deltec Bank explains that financial institutions always seek to better know and understand their customer’s behavior.

To use all the latest innovations — blockchain, AI, APIs and IoT devices, financial organizations must be able to process large amounts of data instantly with quality and safety. Edge computing makes that possible. Instead of sending data back and forth to central databases and long routes, edge computing processes data in the device’s location or very close. Edge computing allows users worldwide to access zero-touch, secure and highly personalized digital services on their devices.

SEE: Don’t curb your enthusiasm: Trends and challenges in edge computing (TechRepublic)

But the costs and risks must be factored in. Implementing edge computing requires planning, investment and a complete understanding of the technology. Having thousands of active IoT devices also represents a significant risk for security. On the other hand, smart-customer experiences often rely on AI, which in some cases has been known to generate biased results or discriminate against users due to data mismanagement. Additionally, Gartner explains that cloud providers are essential in edge solutions. Single-vendor relationships can also present problems related to costs, overlapping solutions and dependency.

Costs, automation and performance

Accenture assures that edge computing is one of the most promising techs for the banking industry. The organization calls the tech “mission-critical infrastructure” for good reason. Financial firms are combining edge computing with cloud and 5G and reimagining their operations. With edge computing, they deploy virtual tellers, facial recognition technologies and faster, less expensive and more secure authentication processes.

Edge computing has also brought down the cost barrier for digital inclusions. Billions of adults worldwide still do not have a bank account. Edge computing can create more accessible and inclusive technologies. Accenture explains that it can be used, for example, to build new inclusion solutions like offering video chat with a banker.

The technology can also accelerate the process of opening accounts and gaining entry into the financial system. The process can be fully automated without requiring human intervention at any stage. This brings costs down to a minimum. Other financial services and processes can be streamlined with edge computing, including financial transactions, customer complaints, transactions and sales, and the expansion of operations.

Compliance and regulations

Managing data is what edge computing is used for. But experts warn that financial data is the most regulated data in the world. The European Union’s General Data Protection Regulation and several American federal and state laws govern how companies acquire, manage, store, transfer, share and dispose of financial and personal data.

Microsoft explains that when managing data, organizations must adhere to the data privacy regulations of the country or region where that data is collected or stored. Companies using edge computing, data centers and the cloud, must also understand when the data crosses national or state borders to adhere to corresponding regulations.

Besides cybersecurity breaches, the most significant risk for financial organizations operating on the edge is data governance. An organization that is found to have breached financial data laws can face legal penalties, millions in fines, loss of clients, reputation damage and even bankruptcy.

Modern blockchain and crypto companies also face strong regulations and will be prosecuted when found in breach. The most prominent law regulating finance is the Bank Secrecy Act, an anti-money laundering compliance statute from 1970 that applies to crypto operations. For example, large crypto exchanges such as BitMEX have been prosecuted for violating this statute, as explained by the Financial Crimes Enforcement Network.

“By assessing a $100 million penalty against BitMEX last August, we hope to convey the message that the BSA applies to institutions dealing in digital assets and cryptocurrency in the same way it does to those dealing in fiat currency,” Him Das, acting director of FinCEN, said in January 2022.

Keeping data safe is not strictly a matter of having a strong cybersecurity vendor, legal advice and consultation must be taken when adapting to edge computing. Additionally, data laws are in constant flux and compliance requires continuous revision.

Security risks and benefits of edge computing

With the increase of IoT and devices connected by edge computing, the digital attack surface of an organization increases. Cybercriminals tend to seek the weakest point of entry into a network and can hack into IoT and smart devices. Therefore organizations now face the increased challenge of monitoring and securing all their endpoints within their edge network.

Microsoft explains that edge computing reduces the risk of remote hacking by storing data locally on the device or offline in a nearby edge center. However, securing all devices in edge computing is not only a digital challenge but a physical one as well. Edge devices that are stored in a location — for example, virtual tellers in bank branches or edge nodes — must be physically secured to prevent on-premise breaches. This can be costly and challengingly complex for companies deploying and managing their edge.

There are, however, several benefits in security when using edge computing. STL Partners explains that edge computing can drive advanced data analytics for real-time cybersecurity, detecting suspicious activity and breaches as they happen, and taking action to shut down attacks.

Edge computing is providing the speed and processing power needed to run biometrics authentication security. This can prevent payment fraud, a crime that represents a significant loss of value for the sector. Banks, traders and crypto companies have embraced biometrics as the ultimate security standard.

The technological developments which have been rising have demanded, and are directly responsible, for the development of edge computing. Hunger for big data, instant transfer speeds, high-security standards and new services without delay: The economic transformation will continue to drive innovation.

Edge computing is a tool that facilitates AI, augmented reality, blockchain transactions, digital tokens, modern banking services, digital stock exchanges, insurance providers and many others. While a company can’t be part of the contemporary financial trend without diving into edge computing, the risks and drawbacks of the technology should be carefully evaluated and balanced against the benefits.