Financial services face mounting pressure to deliver service instant speed across the world, whilst dealing with a rapidly changing regulatory landscape.
Photonics is the science and technology of light, with an emphasis on applications, harnessing light in a wide range of fields. This technology could hold the key to solving many of the problems faced by the industry.
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At the heart of photonics are technologies for generating light and transmitting, amplifying, modulating, detecting and analysing light. Most importantly, using light for various practical purposes. It therefore relies heavily on optical technology supplemented with modern developments such as optoelectronics, laser systems, optical amplifiers and novel materials.
One of the key advantages of photonics is its ability to carry vast amounts of data with lower latency, higher bandwidth and greater energy efficiency compared to conventional electronic systems.
Masahisa Kawashima, IOWN Technology Director at NTT, discusses how light-based photonics technology could change the world of financial services and how it could solve challenges permanently faced by ensuring that the underlying network can keep pace.
Robert Prendergast (RP): How does the your photonic network differ from traditional optical networks in terms of data transmission and customer connections?
Masahisa Kawashima (MK): Our photonic network is called APN—All Photonics Network. What differentiates APN from today’s optical network is that today’s optical networks are designed for telecom carrier backbone transport. Essentially, these optical transport systems are meant to connect backbone stations for telecom carriers.
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By GlobalDataHowever, if we want to connect customer sites—such as financial service institutions or data centres—directly, we can’t simply use optical data transmission. Instead, we need to deploy routers or switches to receive data from customer data centres and then transport that data over the optical network. So, it’s not a direct optical transport; it’s more of a hop-by-hop data transmission.
But with IOWN (Innovative Optical and Wireless Network) APN, we can create direct optical transport paths that connect customer sites—like data centres—directly. This enables us to build high-performance, mission-critical systems, such as banking systems.
You might wonder, why don’t customers like banks use dark fibre from telecom carriers to connect their data centres directly? Dark fibre is only a viable option when data centres are concentrated in a small area, like an urban downtown. But when customers need to connect distributed data centres across a wide area, they can’t rely on dark fibre. They would have to depend on the carrier’s backbone.
With today’s system, connecting a customer site to the carrier’s backbone often involves hop-by-hop forwarding, which adds latency. But with IOWN APN, customers can achieve very low-latency communication without needing dark fibre from telecom carriers.
RP: What are some of the current challenges in the financial sector and how photonic technology help overcome them?
MK: Our society relies heavily on banking systems, so these systems need to be highly resilient. For example, banking systems must have databases that are replicated across multiple data centres to ensure reliability. However, database replication can significantly degrade performance due to messaging latency or the latency of transferring data between sites. It’s critical to connect these sites with very low-latency connections, and IOWN APN helps achieve that.
Currently, banks have to use dark fibre from telecom carriers to achieve such low-latency communication, but this solution depends on the availability of fibre. If the two sites are in close proximity, like in an urban downtown, it’s easier to find fibre. However, data centres are increasingly facing challenges like limited space and power for expansion, and this is where APN becomes essential.
IOWN APN can help connect distributed data centres with minimal latency, even in broader geographic areas.
RP: How do photonic networks address regulatory and sustainability demands?
MK: If we’re talking about carbon neutrality and sustainability, one of the challenges today is that data centres are concentrated in urban areas. The reason is that dark fibre is typically easier to obtain in urban locations, allowing for mission-critical systems to operate effectively. However, as cities aim for carbon neutrality, there’s pressure to reduce data centres within urban areas.
IOWN APN helps by enabling the distribution of data centres to areas with access to carbon-neutral energy. This allows banks and other organisations to comply with sustainability regulations while reducing their carbon emissions.
RP: What changes do you expect to see in the future?
MK: I expect that, as urban areas run out of space and power for data centre expansion, many organisations will need to distribute their data centres. In many major cities, especially financial districts, data centres are already present. But in the future, we’ll likely see new data centre districts in the outer areas of financial cities like London. These districts will rely on IOWN APN to connect financial services offices with new data centre areas outside the city centre.
RP: What regions do you currently operate in?
MK: Right now, in Japan, NTT has started providing APN services. Outside of Japan, NTT Group is ready to offer APN connections upon request. We are essentially system integrators, so as long as customers are interested in deploying APN, we are ready to assist in building the infrastructure.
In Japan, we provide APN services as a telecom carrier, but outside of Japan, there is no public APN service as an infrastructure offering. However, we can help enterprise customers build and operate their private APN networks if they are interested.
RP: What other benefits do you see for the financial services industry from using photonic networks?
MK: Yes, for example, I believe that banks should consider how to compete in the new digital age. For instance, they should look into new business models that leverage AI and data analytics. To deploy new digital banking services, banks will want to use public cloud computing resources. They will need to connect their private data centres with public clouds, and again, messaging latency will be an issue.
With IOWN APN, banks can connect their data centres with public clouds and achieve very low-latency communication for applications like digital payments or digital banking.
In summary, IOWN APN will help banks deploy new digital banking applications and connect to resources in the public cloud more efficiently.
