Why ICT operations must be at the forefront of climate change improvement
Compared to fast fashion, fishing with nets, or drilling for oil, the use of ICT and its relationship to carbon emissions is not a well-trodden narrative. However, ICT is expected to soak up 21% of electrical consumption by 2030, with the sector demanding between 5-9% of electrical use worldwide, equating to 3.5% of emissions globally. With internet use increasing by as much as 78% in the last year, mainly due to the pandemic, and a global trend of technological reliance, the environmental effect needs to be understood and efforts should be made to reduce the impact.
Because ICT has driven innovation that has such a positive impact on personal, social and business operations globally, its utility has often overshadowed the detriment it may have on the environment. However, just like other sectors battling to improve their carbon footprint, there are methods, practices and, indeed, technological changes that can greatly offset ICT’s carbon emissions.
Storage use and the need to migrate
Legacy systems for businesses such as banks have long relied on domestically owned, stored and operated hardware to facilitate their business operations. Naturally, with these systems in place, their implementation follows a long-standing and often out-of-date methodology that is ill-equipped to adopt new, environmentally friendlier technologies as they arise. Similarly, these systems fall short of optimisation and scaling opportunities when compared to newer advancements, since the legacy hardware operates at a maximum capacity. This means that the energy requirements of the legacy hardware cannot be reduced in line with business needs or market fluctuations, and the opportunity to save energy is lost.
To counter the environmental impact of these legacy systems (and see increases in operational efficiency, effectiveness, scaling and faster time-to-market), those still using physical, on-site hardware need to explore the possibilities provided by cloud storage technologies.
In recent research we conducted on cloud technology and banking institutions, we found that 81% of respondents had adopted cloud technologies to save costs, while 95% cited the increased time-to-market of cloud and 86% said the key benefit was the virtually unlimited scaling opportunity. This trend is complemented across businesses more generally, with 50% of businesses using the cloud to store company data in 2021, an increase of 20% when compared to 2015.
Migrating from physical storage to a flexible cloud infrastructure also reduces the need to add additional systems as time goes by, thereby promoting a strategy for the long-term improvement of sustainability practices. Google is a great example of a cloud provider that has invested huge sums into making its operations sustainable and has used carbon offsetting to compensate for all of the carbon it has ever created. By 2030 their goal is to run all its servers using 100% carbon-free energy, meaning their customers can tap into Google’s green credentials to support their own sustainability journey.
Appropriate technical architecture
Excess code is an underestimated but invasive principle of business technology. Often, the technical make-up of websites, machinery or ICT software has unnecessary code that lengthens the processing time and data transmission of an operation. With longer processing times comes more power usage, hindering business efficiency and cost-saving opportunities.
With an increased focus on inefficient coding and its effect on ICT’s environmental impact, the concept of ‘green coding’ is gaining increased traction. Green coding concentrates on coding efficiency and aims to provide systems and guidelines to ensure a business’ ICT architecture is as efficient as possible, with the ambition being to lower power usage, processing time, and therefore overall energy consumption. The outlook for ICT needs to change – processes should be updated to use the absolute minimum energy required to fulfil their function, before shutting down until required again.
Every small gain that can be achieved in reducing processing energy, will ultimately support a large reduction in carbon footprint.
Energy proportionality
Most IT systems within banks and many other organisations have historically lacked the ability to efficiently manage their energy consumption, or have the ability to react to market fluctuations. The energy used by core ICT systems is therefore often ‘fixed’ and not proportionate to the utilisation of those systems. The concept is known as ‘energy proportionality’, whereby utilisation levels can be measured as a percentage of utilised computing power. While high utilisation is the objective, low utilisation is still the norm and is usually a result of an overestimation of how much software and therefore server capacity is required or will be used. Energy proportionality can also be exacerbated when there are multiple software and ICT operations taking place, or where replicated data centres or resiliency is felt to be required.
Adopting a combination of cloud technology and green coding can reduce the disparity of projected and actual utilisation. While green coding ensures that the delivery of software applications is as efficient as possible, cloud technology is capable of providing real-time changes to storage and processing capabilities as markets, traffic or software usage changes. This approach has huge benefits for cost-cutting, as migrating to cloud systems usually means you can also adopt a ‘pay-as-you-go’ cost structure for your data processing and storage requirements. Having automated power output based on actual energy expenditure is capable of eradicating overestimations for energy use, thereby saving energy consumption and promoting high utilisation as a result.
Streamlining operations for the future
Advancements in storage technology utilising the cloud, allows many businesses to tap into the efficient, low-energy consuming infrastructure, streamlining their operations and achieving maximum efficiency. Not only will this help firms lower their carbon emissions output by reducing unnecessary power usage, but can also allow them to improve the effectiveness of their systems and processes to save time and costs whilst supporting scaling opportunities and reducing time-to-market.
Combined with the growing knowledge of green coding principles, the cloud can be used in conjunction with precise technical architecture to provide firms with improved efficiency for their business in both an operational and environmental sense.
All of those within the ICT sector have a responsibility to streamline their emissions output and using these technologies and disciplines is a clear-cut method to fulfil this ambition.
About the author: Dean Clark is Chief Technology Officer at GFT.
Traditional companies are struggling to keep up
Today’s digital landscape frequently imposes new demands on financial institutions, with innovative technologies and new regulations such as PSD2 disrupting established processes. As physical banks and cash machines continue to disappear from our high streets, there is a growing shift towards customers using their mobile phones to conduct their banking activity. In fact, over two-thirds of British adults now use online banking[1], putting great pressure on traditional banks that are burdened with legacy IT systems. As 46% of bankers perceive this infrastructure to be the biggest barrier to the growth of commercial banks[2], the need to update the network is more urgent than ever before.
The challenger banks of today, born on the cloud, automatically inherit cost, performance, and efficiency benefits that traditional banks simply do not have. Without having to embrace the initial digital change, this new generation of mobile banks can be more nimble, hoisting technologies to personalise their services, and do so at a much lower cost. Legacy systems have proved reliable in the past, but in order to maintain momentum in the digital age, and compete with innovative businesses, financial institutions should push forward with rapid investment in cloud services.
The need to migrate to the cloud
Massive growth in data usage has made it increasingly difficult for organisations to store all their intelligence on in-house servers. Today’s financially-literate customers should not expect to have their personal information kept in physical computer systems. Instead, they expect instant access to their personal data anytime, anywhere, and in the most secure manner.
While some financial institutions are exploring cloud-based solutions, many remain hesitant in undertaking a full-scale migration. With such a complex transformation to undertake and outdated architecture to contend with, companies are encountering certain obstacles. Time and cost pressures, in particular, are leading to some firms to ‘cut corners’ when it comes to upgrading their infrastructure, causing severe disruption to customers. From October 2018 to October 2019, the UK’s Financial Conduct Authority (FCA) reported that major banks suffered 265 IT shutdowns, which prevented customers from making payments[3].
The financial services sector has also been shaken by a new wave of regulations aiming to better protect both customers and businesses. Since the General Data Protection Regulation (GDPR) has come into force, European Union citizens have been granted more control over their personal data. This means that organisations collecting data are obliged to do so legally and to protect it from misuse.
Legacy systems have proved reliable in the past, but in order to maintain momentum in the digital age, and compete with innovative businesses, financial institutions should push forward with rapid investment in cloud services.
Furthermore, with Payment Services Directive 2 (PSD2) fast-approaching, companies are obliged to implement Strong Customer Authentication (SCA) to mitigate the risk of payment fraud. A huge number of fraud cases – nearly 340,000cases - were reported in 2018[4], calling for a double layer of authorisation to make financial transactions over £28 more secure. It has therefore never been more important for institutions to properly execute a full-scale migration to the cloud to benefit from its innovative services, including biometrics.
Benefits of migration
The AWS marketplace, and similar service providers, offer an online platform through which customers can unlock a plethora of cloud and other digital applications. Making the transition via these networks, where the cloud is effectively brought to you, renders the process far more simple and frictionless.
Through AWS, financial firms can easily integrate the necessary biometric authentication platforms. Designed to verify the identification of employees and customers using multi-factor authentication, companies become far less susceptible to cyberattacks and data breaches. By adopting digital identification technologies, institutions can achieve regulatory compliance and offer a safer customer experience. It is not too late for traditional firms to transform themselves and compete.
The greater computing power of cloud-based software brings a host of other benefits to organisations and customers. Having data centralised through the cloud avoids the latency issues that come from having computing tasks handled from afar, and permits the on-demand availability of resources. This allows a more seamless digital experience to be created, to meet the evolving needs of customers. Simultaneously, businesses can gain cost and time efficiencies that translate into more effective workload management, increased flexibility and ultimately productivity.
If financial companies are to avoid falling behind today’s challenger banks, they must discontinue the use of legacy IT infrastructure, and fast. By utilising the resources that services such as the AWS marketplace have to offer, companies can efficiently embed the cloud into their operations, and deliver the best online experience expected of today’s educated customers. The migration will only ensure secure account entry using the latest biometrics, it will also achieve cost and time efficiencies that could well turn around profit margins.
[1] https://www.theguardian.com/business/2019/jul/01/mobile-banking-to-overtake-high-street-branch-visits-in-two-years
[2] https://www.instapay.today/insight/legacy-technology-in-banking-a-real-issue-or-is-it-just-perception/
[3] https://www.telegraph.co.uk/news/2019/11/27/major-banks-suffer-five-glitches-week-finds/
[4] https://www.paymentscardsandmobile.com/uk-fraud-report-2019/
We all know the cloud is leading the way in transforming operations across financial organisations, but while a significant enabler, it represents just one element of much wider digital investment. We hear from Steven Boyle, CEO of Integrated Cloud Group, who discusses how cloud technology is only the beginning of true digital transformation for financial institutions.
Cloud is pulling the strings, but household names such as HSBC, Barclays, Lloyds Banking Group, and the Royal Bank of Scotland are increasingly investing in a host of transformative, agility-enhancing technologies such as biometrics, robo-advisors and artificial intelligence as they pledge to keep abreast with customers’ demands for faster, simplified banking interactions.
I see traditional organisations looking more and more to FinTech startups to build and integrate new functionality and that will improve services, allowing them to focus more on customer needs.
Last year, HSBC launched biometric security for mobile banking in the UK, claiming that it was the biggest rollout of its kind. The bank says that this will enable more than 15 million customers to access accounts, using voice or fingerprint recognition biometric technologies. Lloyds – which is looking at Amazon Echo technology for voice recognition – also passionately believes that such notions have huge implications for Britain’s 360,000 blind or partially sighted, potentially opening up banking like never before.
Certainly, to my mind, it all represents a significant leap forward for biometrics technology being used in the UK banking industry for the secure authentication of account holders.
First off the blocks was Barclays which has been using voice authentication in its call centres since 2013, and in 2014 announced plans to introduce finger vein recognition technology for some.
However, all HSBC customers will have access to fingerprint authentication services using the fingerprint readers that are built into Apple iPhones, in tandem with HSBC’s mobile banking app. Like Barclays, HSBC is using Nuance Communications voice recognition, which analyses over 100 unique characteristics to identify a speaker. Furthermore, once HSBC and First Direct customers have registered their finger and voice prints, they will no longer need to remember security passwords or PIN details. It’s clear to me that such innovations hold the potential to absolutely transform customer interactions.
Then there’s the much-discussed and analysed rise of the robots. The likes of Lloyds Banking Group, Barclays and Santander UK are further innovating with the introduction of digital robo-advisors – essentially, computer-generated recommendations based on online financial questionnaires – which, it is thought, could help to fill the ‘financial advice gap’ for those with small savings pots who need investment advice but can’t necessarily afford it.
In this instance, the bank suggests how much to invest into certain funds, and then transacts on a customer’s behalf in return for a fee. While not necessarily a solution, it seems to me an important recognition of consumer needs in the wake of the retail distribution review which scrutinised the mis-selling of investment products and made it uneconomical for banks to provide advice. Certainly, platforms like Wealthfront and Betterment have already proved hugely popular – and it’s no coincidence that Lloyds jointly hosted an event entitled, ‘Can I Trust a Robo-Advisor?’ at London’s FinTech Week.
RBS is also reportedly planning to utilise robo-advisors across its investment and protection divisions as part of a cost-saving strategy that is expected to reduce the need for face-to-face advice.
Nevertheless, it should be noted that others are following an alternative path; HSBC is set to unveil a division of investment advisors for all customers, while Santander UK is introducing 225 investment advisors across its branches.
Another parallel disruptor is the rise of artificial intelligence which is set to allow consumers to talk to a device and receive the information they are looking for. In fact, it’s already managing many banks.
A leading proponent of AI – predicated on the belief that data is king for the leveraging of informed decision-making and risk management – has been Barclays, which says that the notion of touching a device could soon be obsolete when it comes to executing transactions. The bank sees digital technology as being crucial to its future and believes that its customers could soon be talking to a robot computer system to perform simple transactions.
Lloyds Banking Group introduced the first networked ATM in 1973, and has continued to innovate, now employing Google analytics tools to analyse customer behavior, allowing it to better understand customer needs and meet them in real time.
Amid this unprecedented period of digital upheaval, the opportunities for the banking sector are effectively limitless – suddenly the walls have come down and there are extraordinary possibilities all around. Big banks are turning to technology for myriad reasons, but at the heart of the drive for transformation are significant economic benefits, matched by enhanced agility, less risk, and a better customer experience.
Those that think heightened technology means less of a customer relationship should, to my mind, consider the idea that it could in fact serve to free up time for banking staff that will actually facilitate, rather than, hinder relationship building. This will, in turn, allow more unique needs to be addressed while the more mundane tasks are quickly and automatically fulfilled.
As data security concerns are increasingly answered by better protection, it all makes for a fascinating road head for the banking sector as it embarks on the journey to new heights of speed, accuracy and efficiency.
By Gary Turner
Over the last decade, cloud technology has enabled us to become more mobile than ever before, giving business owners and sole traders the freedom to work wherever and whenever, from any device. So in celebration of National Technology Day, here are five ways cloud technology can improve your business processes - and productivity.
- Access your numbers anywhere, anytime
Cloud technology lets you access your numbers anytime, anywhere. You’re no longer tied to the office. Mobile apps enable you to check your cashflow, raise an invoice and access your accounts wherever you are. Pretty handy for a business that’s always on the move.
- Get a more up-to-date view of the business
When your numbers are in the cloud, you always have an up-to-date view of your current financial situation. And that means you can make better informed financial decisions. You’re no longer looking at out-of-date management reports: you’re looking at your business as it looks right now. That’s a major advantage for a fast-growing company.
- Build a more productive relationship with your accountant
Working with your accountant can be time-consuming and costly. But in the cloud, you and your business advisers are always looking at the same online single ledger – and that saves you both a lot of time. Real-time conversations about your finances make for a deeper and far more valuable accountant/client experience. Your accountant’s no longer an expensive overhead, they’re an integral part of your business.
- Go paperless and lose that clutter
Keeping on top of your paperwork can be a challenge. There are receipts, expenses claims and invoices to deal with – and that takes time. Cloud accountancy apps enable you to import your paperwork into the accounting software, pulling the data into the digital realm and letting you see the numbers that matter. It’s a quicker and more efficient way of dealing with your finances and a brilliant way to share your data and paperwork with your accountant.
- Create a tailored suite of software solutions
Wouldn’t it be great to have tailored software system for every aspect of your business? Cloud accounting software add-ons let you build a system that specifically suits your business needs.
With these plug-in ‘add-ons’, your software can grow organically with your business. You build up a package which covers all the functionality you need, all hosted in the cloud and connected together.
So, if you’re an aspiring, 21st century business, cloud accounting gives you an unrivalled way to keep on top of your finances.
Gary Turner is the UK co-founder and managing director at Xero.
