Technology
Digital transformation is key for cost-cutting and meeting sustainability goals
Global Banking & Finance Review®
Company
By Pete Coulter, UK Regional Director at GFT
Technology moves faster than the rate at which we can fully apply and master it. With new or improved products, platforms, and services constantly altering the concept of ‘best practice’, digital transformation as a whole is the only constant. While filling business activities with as much cutting-edge tech as possible may seem like the best move, the balance between emerging tech and legacy systems is what creates cohesion between emerging objectives and operational resilience.
That being said, some transformative technologies have demonstrated their value for businesses seeking operational efficiency, optimised cost-cutting, and improved sustainability standards, particularly in light of UK objectives for large businesses to become carbon neutral by 2030. Some examples of these technologies are cloud data storage, green coding principles, greener finance forms such as green bonds, and financial facilitators such as distributed ledger technology, notably blockchain. All of which should be seriously considered by all manner of businesses and financial institutions seeking a streamlined operation.
Cloud data storage
Businesses and banks have relied on domestically owned, stored and operated hardware to facilitate day-to-day and long-term data storage. The issue with these legacy systems is that they were usually conceived when environmental goals were not a priority, and the business had a limited view of their future scale-up. Consequently, these systems are now out-of-date, inefficient and impractical, as they cannot be onboarded with new technological innovations.
Where sustainability is concerned, large-scale data units have not been optimised to reduce energy consumption. As these units grow in size and input/output increases, energy consumption has continued to snowball. Not only is this a detriment to running costs, but also breakdown or mechanical issues, spending money on repairs to a system that will soon be retired. In short, legacy data systems are reaching the end of their dominance, becoming increasingly more expensive to run.
In contrast, cloud technology has worked to resolve many of the aforementioned issues. For example, AWS will operate 100% of their cloud banks with renewable energy by as soon as 2025 while Google plans the same for 2030. Environmentally conscious banks and businesses can tap into these green credentials to support their own sustainability journey.
The cloud has been built to scale workload based on current requirements. This reduces excess energy and unneeded capabilities leaking unutilised power. As data centre workload and internet traffic has increased, constant efficiency monitoring has kept energy expenditure in data centres on a flatline – meaning cloud data storage can handle increased input without increasing energy output.
The cost-cutting capabilities of the cloud add another reason to migrate. By scaling use requirements, companies only pay for the storage they have used. Similarly, storage does not occur on-site for companies, significantly reducing maintenance costs and allowing further utilisation of company space for increased business operations.
As for repair costs, the cloud provider takes on that responsibility, ensuring data facilities are operating as they should at no further expense to the business. In late 2021 research GFT conducted research on cloud technology and banking institutions, and we found that 81% of respondents had adopted cloud technologies to save costs, while 86% said the key benefit was the virtually unlimited scaling opportunity.
Green coding
ICT is forecast to form 21% of electrical consumption by 2030, with information and technology use demanding between 5-9% of electrical use worldwide, equating to 3.5% of emissions globally. With internet use increasing by as much as 78% year-on-year, the environmental effect needs to be understood and efforts made to reduce the impact.
Part of the reason for lacking energy efficiency in ICT is down to the working dynamics of coding architects. As coding grew more sophisticated, architects strived for complexity and intricacy. However, thinking has changed, with excess code now recognised as an underestimated detriment to digital efficiency. Often, the technical make-up of websites, machinery or ICT software features over-complicated code that lengthens processing time, consequently requiring more energy and hindering cost-saving opportunities.
In contrast, green coding champions efficiency by cutting down on excess code and building products and services that have been streamlined and simplified as much as possible, both during construction and subsequent updates. Adhering to this method of ICT architecture means code runs quicker, saving on power usage and processing time.
Green coding is only now emerging as a best practice, but businesses and decision-makers should understand the benefits of simple yet effective code, not just to save processing costs but also to reduce their emission output.
Green Bonds
Green Bonds are an emerging bond type that is used to finance environmental projects globally, from wind farms to sustainable housing projects. They have flourished in recent years, growing from a total volume of $104bn in 2015 to $1.5trn in 2022, according to the Climate Bonds Market Intelligence.
For large-scale businesses and banks that have hefty emission outputs to negate, the issuance of green bonds provides an effective way of commissioning climate-positive projects. Green Bonds are untaxable and grow over time, making investors keen to invest in the asset class, doing so in bulk. Consequently, project funding is faster and funding is higher, facilitating the creation of large-scale environmental projects.
Green Bonds are just one of many ways banks and businesses are digitally transforming finance into greener and more effective methods. Sustainability-backed bonds have proven their demand and popularity in recent years and as the time for net zero 2030 looms investment and issuance will only increase.
Distributed Ledger Technology
Distributed ledger technology (DLT) is another transformative technology that has burst onto the scene in the last decade. Sparked by its application in cryptocurrency, DLT has grown in popularity and use in other sectors since.
DLTs, such as blockchain, are heralded as safer, faster and more transparent when passing information and assets between sender and receiver. Information is stored and changed automatically, effectively reducing middle man intermediaries while relying on more robust automation and ai-based technology. For retail banking, fewer intermediaries equal fewer risk points across the transaction, less energy consumption, and faster transaction speeds.
DLT application for both businesses and banks has barely scratched the surface, but many thought leaders and influential businesses see the technology as the next big thing in the way data is stored and moved. We’ll begin to see more and more DLT-based operations spring up in the coming years, with its application likely to positively impact business cost, risk, and energy-saving exercises significantly.
Looking ahead
What is evident from the aforementioned technologies is that emerging tech innovation is increasingly geared toward cost and energy efficiency. For businesses aiming to reduce profit and energy waste, these innovations cannot come soon enough. Taking steps to consider the latest digital transformation breakthroughs will better prepare businesses for adoption in the near future, and with the proper implementation, operations and the planet will begin to benefit.
Right now, technology is heading in all the right directions, and GFT is looking forward to seeing and supporting its further applications.
Digital transformation refers to the integration of digital technology into all areas of a business, fundamentally changing how it operates and delivers value to customers.
Green bonds are fixed-income financial instruments used to raise funds for projects that have positive environmental impacts, such as renewable energy or sustainable infrastructure.
Cloud data storage is a service that allows users to store and manage data on remote servers accessed via the internet, providing scalability and reducing the need for physical storage.
Distributed ledger technology (DLT) is a digital system for recording transactions across multiple sites, ensuring transparency and security, commonly associated with blockchain.
Green coding involves writing efficient code that minimizes resource consumption and energy use, contributing to more sustainable software development practices.
Explore more articles in the Technology category
