The Finance Sector Embraces Technical Innovation with GAIA-X

Frankfurt am Main is internationally relevant not only because of its role as a financial center, but also because of the many data centers that have made Frankfurt the Internet capital of Europe, in a symbiotic relationship with the world’s largest Internet Exchange, DE-CIX. Recently, financial companies have increasingly taken advantage of the opportunities offered by digitalization. They are even among the pioneers in the use of a new type of digital infrastructure.

Given that now, as recently determined by PWC, “the cloud-positivity of German banks is on the rise”, this is proof that banks are more innovative than their reputation suggests. Specifically:

- 78 percent of German banks rely on cloud services,

- 36 percent of non-users want to move to the cloud in the medium to long term,

- 73 percent already consider cloud computing as a fixed component of their strategy and

- 87 percent have defined processes for monitoring and managing cloud risks.

But this high level of cloud service usage also proves something else: That the clouds, first of all, are secure. And, secondly, that banks expect such high benefits from their use that they take on the significant effort that comes with complying with regulatory requirements: 76 percent of banks contractually specify mandatory compliance requirements for cloud services, paying particular attention to agreements on the location of data processing and the institution’s right to audit cloud service providers.

A secure and sovereign data infrastructure for Europe – GAIA-X

The finance sector is one of the pioneers in the use of a digital infrastructure that is just beginning to emerge: GAIA-X. The European project to build a secure and sovereign data infrastructure has been well received by the finance industry.

The key to GAIA-X will be for the company to have much greater control over data and the way it is distributed – securely and without large latencies. Today, data in the cloud is often available via the browser-based Internet. This limits the control over the connection to the data, because the data travels via the public Internet. In general, within the public Internet data is routed automatically along many and variable paths – and it’s not possible for the owner of the data to control the route that the data travels along. One solution is a point-to-point connection. However, while this is more secure, it also leads via the Internet.

A much better solution is a direct connection via an Internet Exchange between the user and provider, for example. This is secure and fast – with very low latency – and offers control over the pathway that the data takes. This approach also works for “one-to-many” communication, i.e. the service provider connects directly to many users via the exchange, and the users in return can connect directly to many service providers. It also means that an enterprise can connect securely with its entire set of partners along its value chain in a federated manner. The Internet Exchange acts as a mediator within this Internet federation. In this way, a virtual “federation layer” is created, which uses the same protocols and technologies as the Internet, but makes the path of the data more transparent and gives the possibility to secure these federations. As the operator of the largest Internet Exchange in the world, DE-CIX has been a part of the GAIA-X project since its very beginnings, is a founding member of GAIA-X AISBL, and is providing its experience and expertise in designing and building secure and resilient interconnection infrastructure.

An important goal of GAIA-X is to enable a wide variety of stakeholders to share their respective data pools securely and efficiently. The idea behind it is simple: By throwing their data together, stakeholders can collectively gain insights that their data base would be too thin to obtain on their own. As is often the case with simple ideas, the implementation is tricky. The question is whether it will be possible to build a secure, sufficiently dimensioned infrastructure with sufficient storage capacity and low latency over which the players can communicate with absolutely secure standards.

Finance industry sees the potential of GAIA-X

In the German financial hub in Frankfurt, a use case for the finance industry is already being developed that will vividly demonstrate the potential of GAIA-X. “Financial Big Data Cluster”, or “Safe FBDC”, is the name of the project. Participants to date include the Ministry of Economics in Hesse, the Fraunhofer Institute for Material Flow and Logistics, the Frankfurt TechQuartier, Deloitte Consulting GmbH and Deutsche Börse AG. DE-CIX is also involved in the implementation and contributes its expertise in digital infrastructure by standardizing the necessary interconnection.

The involvement of other partners such as traditional financial institutions, start-ups, public actors, and research institutions is possible and envisaged. They are to be given access to relevant financial market data, staggered according to use case and authorization. From this data, for example, the complex effects of different monetary policy instruments on securities and companies can be better understood. This could help improve the effectiveness of fiscal policy decisions. In the areas of risk management and sustainable finance, an analysis of compiled data could also help to improve efficiency and effectiveness.

Because the amount of data available in the future will be very large, artificial intelligence and machine learning will support the analysis: This is further proof of how open-minded the financial sector has become towards IT innovations – and not just in Germany, by the way: As a patron of the GAIA-X AISBL, I am privileged to be helping to establish the European Financial and Insurance Data Space, an extension of the Frankfurt project to Europe.

Harald A. Summa has been CEO of the world’s largest Internet Exchange DE-CIX in Frankfurt since 1996, and is Chairman of the Board of DE-CIX Group AG. Harald A. Summa is also founder and CEO of eco – Association of the Internet Industry, as well as being patron of GAIA-X AISBL.