Thriving in a Hyper-Connected World

SIBOS, one of the largest payment conferences in the world, kicks off this morning in London. This year the theme for the conference is:

Thriving in a hyper-connected world, recognising the growth opportunities available from digital technologies to initiate new platforms, value propositions and business models. 

 In terms of conference themes, this is about as relevant as they come with respect to the work I do each day so I’m hoping to share some thoughts and business strategies on this theme.

The Traditional View of The Hyper-Connected World

My phone, laptop, smart speakers, and watch will all work offline, but their value in terms of overall usefulness multiplies exponentially when they are connected to the internet. The difference in value can be so great that it often feels hard to operate without connectivity (even though the best vacations seem to be the ones completely off the grid.) This need for hyper-connectivity, multiple devices to be connected to the internet, has become the way that many of us operate in our personal as well as business lives.

Mobile network operators have built massive networks that allow us to roam most places we go with the ability to stay connected. Airplanes, hotel, and stores help offer Wi-Fi to help keep us connected in those places where cellular may not reach. New technologies such as 5G will continue to push the amount how much we consume in this hyper-connected world.

My View of the Hyper-Connected World

Most of the world sees hyper-connectivity as I have described it above, but I happen to see it a bit differently. The hyper-connectivity we experience in our personal and business lives in no small part would not work the way it does without the private interconnection that occurs between companies who sit in Equinix. Equinix’s global platform connects the networks, clouds and enterprise to each other; helping not only the internet scale but also creating thriving digital ecosystem in industries such as financial services.

I’ve worked for nearly 11 years building out financial service ecosystem in Equinix but prior to working for Equinix, I was a customer and have another 3-4 year of experience of financial service ecosystems at Equinix from that side. At my prior company, I was over network and data center procurement. Before selecting Equinix as my co-location provider, I was constantly challenged with rising network costs to accommodate growing bandwidth needs and frustrated customers and sales representatives who could not understand why sometime network connections took several months to turn up; delaying projects and time-to revenue. After selecting Equinix, I was able to order a new connection to another Equinix customer and have it live in 24 hours. Moreover, I was paying a low and flat rate for 10X to 100X the amount of bandwidth I had previously. My world had changed and it became very easy for me to evangelize the benefits of Equinix once I had joined the company, I had seen them myself.

The financial ecosystem inside of Equinix has now grown to over 1250+ customers who have tens of thousands of private network connections. 

These Equinix customer interconnect to each other as partners, customer and service providers within the financial services industry, but also to network providers, cloud providers and other companies outside the financial services industry. Trillions of dollars pass through these interconnected networks in Equinix, creating a secure and more efficient market for the world to transact in payments, retail banking and electronic trading. This is the hyper-connected world that I see and enable in my role at Equinix.

This past year Equinix has made it even easier for their customers to privately connect to each other through Equinix Cloud Exchange Fabric (ECXF). Customers with a port on the ECXF can turn up a virtual connection to another Equinix customer in under 15 minutes and scale this up and down as needed. The initial use case for ECXF was for enterprise to have private multi-cloud connectivity to the cloud service providers who act as sellers on this multi-sided platform. Financial Service providers are now acting as sellers on ECXF, quickly and securely offering robust private connectivity to their private cloud services more economically. This will drive an even more hyper-connected world making it easier for fintechs and banks to connect to each other off the public internet; reducing the attack surface for each.

The Future of Payments: Instant, Open and Everywhere

This hyper-connected world is enabling the future of payments which I see as being “Instant, Open and Everywhere.” It was only last month that I learned that SWIFT, the organizer of SIBOS, describes the future of payments as “Instant, Accessible, and Ubiquitous” – their use of essentially synonymous terms is great validation of what I’ve been saying the last two years at Equinix. SWIFT’s GPI is a great example of this trend towards Instant, Open and Everywhere. SWIFT and other payment networks are on the mission to make as easy to settle and clear a teal-time payment (Instant) between two people over open APIs like GPI (Open) across borders (Everywhere) as it is to do so with your favorite P2P (person-to-person) app on your mobile phone.

New Platforms

Platforms that connect producers and consumer to each other are revolutionizing how businesses offer their services and this goes well beyond the classic examples of Uber, AirBnb, and Alibaba. It has been said that if you aren’t figuring out how to become a platform or move your business onto a platform, someone other business be doing so as a way to disrupt you. Financial services are embracing this Platform Economy with a number payment network and service providers transforming their business models to become more of "platform" than a "dumb pipe". No doubt the industry has its eyes on the big tech platforms (Facebook, Google, Apple, Alibaba) who are pushing the boundaries and expectations.

New Value Propositions

While there is still a lot of money being made in the movement of money; in general this functionality is being commoditized. There is only so much value one to be extracted out of a transaction by being the one to move the money. As such, payment companies are developing new value propositions that will allow them to continue meeting investor expectations for growth. Innotribe at SIBOS is an opportunity for companies who are coming up with some of the most innovative new value propositions to highlight their ideas.

New Business Models

The future of payments that is being driven by real-time payments, open API's and the ability to do payments anywhere (cloud, IoT, cross-border) is creating new business models. One example of is as clearing and settlement move to real-time, analytics are being used to provide business financing much sooner; relieving some of the cash flow problems a business may have. Other new models are built around overlay services to the national payments systems which will make invoice reconciliation far less costly and more efficient for businesses.

Keys to Thriving

In order to thrive this this hyper-connected world where hybrid multi-cloud architectures are the architecture of choice, payment companies are creating payment hubs inside of Equinix so that they can securely interconnect to their critical partners, customers and providers. (See image below). By extending their Digital Edge into a thriving payments and retail banking ecosystem in Platform Equinix, these companies are positioning themselves to become leading industry platforms by making it easier to connect to their new and upcoming services (e.g. new value propositions and new business models.)

Working with the leading payment companies in the space, there are certain best practices that I have seen emerge. I would be happy to do a Digital Edge Strategy Briefing with you in-person at SIBOS or at another time, but here are a few keys strategies that you should be looking at.

1. Identify strategic partners and customers with whom you will or hope to exchange data. This is the first step for thriving in the hyper-connected world. Whether the data is small or large, these should be the companies that are critical to you generating revenue. Which connections are most costly? Which connections have trouble with latency or downtime? Which connections leverage public internet and should be transitioned to private connectivity? How important is turning up new connections quickly? The answers to these questions will determine if you should be looking at co-location based model for improved network connectivity.
2. Determine your geographies. Leading global payment companies are distributing their architecture to comply with data sovereignty regulations and to better serve their customer by processing their data in local markets for lower latency. If you know the markets you plan to serve, how will you connect them? Do you need to go into markets where you don't have any customers yet?
3. Build a Digital Edge. Many incumbents have their own data centers. Some of their workloads are moving into the cloud, but bare metal isn't going away any time soon. These incumbents have historically leveraged MPLS to bring private network connectivity into their data centers. This is creating delays in time to revenue, creating more complex networks, and isn't scaling with the number of new companies emerging in the industry. Incumbents that have created a Digital Edge or a Payment Hub in Equinix, have made a new demarcation point for where they can meet their partner, customers and service providers outside of their data centers. They are also shifting their MPLS connection to these points to avoid local loops by being in the same building as their critical networks. This is a key strategy for thriving in the hyper-connected world and being ready for the future of payments. Cloud-native fintechs who have relied on the public internet to connect to their partners are finding that the public internet is not the preferred connectivity model of financial institutions. Just as incumbents who need a digital edge outside of their on-prem data centers, so do cloud native fintechs. These digital edges can be physical or virtualized, but they become a meet-me point for partners and customers to create private connectivity with networks and hardware security modules.
4. Understand multi-cloud. It is a multi-cloud world, just look at the number of cloud providers present at SIBOS. Whether you want to avoid vendor lock or simply find differentiated value proposition for different workloads, you are likely to need connectivity to multiple cloud providers. Moreover, the cloud provider that you choose for your critical workloads may not be the same cloud provider that your partner or customer chooses. Routing between two clouds over the public internet can be costly when it comes to data egress charges and it can be difficult to troubleshoot when there are performance issues. With a Digital Edge or Payment Hub in Equinix, it becomes simple to establish private connectivity between the two clouds with Equinix Cloud Exchange Fabric whether it is for your own workloads or to connect between your cloud and your partners.

I am excited to attend SIBOS this year and discuss these topics with many of the service providers and financial institutions who are going through their digital transformations and are working to thrive in this hyper-connected world we all live in.