Recent advancements in data center technologies, including data center as a service (DCaaS), are driving new opportunities and benefits for financial services firms (FIs). For example, in a DCaaS arrangement, a data center provider’s resources are consumed by an FI as a service. This offers “more flexibility and scalability, and a more flexible cost structure,” BizTech describes. “The provider manages the infrastructure, assuring uptime to an agreed-upon level, and maintains the operation so the client can use the resources as needed.”
Benefits of DCaaS and other data center trends may include faster, real-time processing; improved risk assessment; and increased operational efficiency. These benefits may apply to both established institutions and fintech startups. But firms need the right strategic approach if they hope to take advantage of new data center opportunities.
In this article, we discuss the five trends driving 2025 data center strategies and investments among financial firms. We share the key benefits of these technologies, strategies, and techniques. We also share recommendations for proceeding with these exciting new opportunities for your firm.
1. AI is Transforming Financial Data Center Demands
Financial firms’ use of AI is driving greater compute demands from data centers.
Already, financial firms are deploying sophisticated machine learning models that can analyze patterns across millions of transactions in real-time, identifying potential fraud, or market risks with greater accuracy than ever before. Advanced data centers are supporting these AI-powered predictive analytics, enhancing risk management and fraud detection capabilities.
Firms also are employing NLP algorithms to analyze unstructured data from sources like social media, news articles, and financial reports, providing valuable insights for investment decisions and market analysis. “NLP is able to parse the complexities of audio related to business and finance — including industry jargon, numbers, currencies, and product names,” MIT Sloan School of Management reports. “As it ramps up, the industry is able to piggyback off of years of research and development by tech giants like Google and Facebook.”
All these changes are driving a need for more powerful and energy-efficient computing infrastructure. “The AI data center industry must continually integrate more powerful, more efficient hardware… designed to support AI’s complex workloads,” Data Center Frontier reports. “As the AI landscape continues to evolve, increased industry collaboration will become essential in meeting the complex, highly specialized demands of tomorrow’s AI data centers.”
How to Proceed with Data Center Support for AI-Driven Capabilities
Financial institutions should strategically align AI and data center capabilities to maximize efficiency, security, and uptime. You can begin by assessing your current infrastructure and identifying areas where AI can provide the greatest impact.
- Conduct a comprehensive assessment: Evaluate existing data infrastructure to identify areas where AI can drive the greatest value for your firm.
- Invest in AI-ready infrastructure: Upgrade to specialized hardware like GPUs and TPUs to support AI workloads, or partner with a service provider who can deliver on your requirements.
- Develop AI talent: Train existing staff or hire data scientists and AI engineers to manage and optimize AI systems.
- Implement robust data governance: Ensure data quality and compliance with regulations for AI models.
- Pilot AI projects: Start with small-scale AI implementations to test and refine strategies before broader deployment.
2. Firms Will Use Edge Computing for Real-Time Transactions
Recent advances in edge computing hold new promises for financial firms. Financial institutions can significantly reduce latency in transaction processing, a critical factor in high-frequency trading and real-time payment systems. This reduction in latency is achieved by processing data at or near the point of origin, rather than sending it to centralized data centers for processing.
Edge computing also enhances security and compliance for financial institutions. By processing sensitive financial data locally, edge computing reduces the risk of data breaches during transmission to centralized servers.
The integration of edge computing with AI and machine learning is particularly powerful for fraud detection and risk assessment in real-time. Financial institutions can deploy AI models at the edge to analyze transaction patterns and detect anomalies instantly. In fact, Forbes describes “deployment of real-time fraud detection systems that leverage deep learning models to analyze transaction patterns across multiple channels simultaneously” as a “key strategic imperative.”
How to Proceed with Edge Computing for Your Firm
To capitalize on edge computing, financial firms must strategically deploy edge infrastructure and integrate it with existing systems. Consider a phased approach focusing on high-impact use cases>
- Identify key use cases: Determine specific applications where real-time processing can provide a competitive advantage, such as high-frequency trading or fraud detection.
- Evaluate edge locations: Select strategic locations for edge deployments, considering proximity to data sources and end-users.
- Implement secure edge infrastructure: Ensure robust security measures at the edge to protect sensitive financial data.
- Integrate with existing systems: Connect edge computing resources with central data centers and cloud platforms for seamless data flow.
- Monitor and optimize performance: Continuously monitor edge deployments to optimize performance and ensure reliability.
3. FIs will Adopt DCaaS for Greater Agility and Growth
Data Center as a Service (DCaaS) is emerging as a key solution for financial institutions. Currently valued at $89.58 million, the global DCaaS market will expand to $289.91 billion by 2031 with a CAGR of 18.3%, GlobeNewswire reports.
DCaaS offers financial organizations a flexible, scalable approach to IT infrastructure management. It allows firms to access cutting-edge data center capabilities without the substantial capital expenditure typically associated with building and maintaining their own facilities.
One of the key benefits of DCaaS for financial firms is the ability to access high-performance computing resources on-demand. This is especially valuable for resource-intensive tasks such as risk modeling, algorithmic trading, and large-scale data analytics.
DCaaS providers are rising to meet growing security and privacy challenges among financial firms as well. Many offer advanced security measures. These include physical security, data encryption, and compliance with industry-specific regulations such as GDPR and PCI DSS.
By leveraging DCaaS, firms can rapidly adapt to changing market conditions and technological advancements without being constrained by legacy systems or long-term infrastructure commitments.
How to Proceed with DCaaS for Your Firm
Financial institutions should carefully evaluate their needs and select a DCaaS provider that aligns with their specific requirements and compliance standards. A well-planned migration strategy is crucial for a successful transition.
- Assess infrastructure needs: Determine the specific computing and storage requirements for different financial applications.
- Evaluate DCaaS providers: Research and compare different DCaaS providers based on their service offerings, security measures, and compliance certifications.
- Develop a migration strategy: Create a detailed plan for migrating applications and data to the DCaaS environment, minimizing disruption to operations.
- Implement robust security controls: Ensure that the DCaaS environment meets stringent security requirements, including data encryption and access controls.
- Monitor and optimize performance: Continuously monitor the performance of the DCaaS environment to ensure optimal performance and cost-effectiveness.
4. Sustainability in Data Center Operations
Financial firms taking steps to reduce their carbon footprint, align with broader sustainability initiatives, or meet sustainability regulatory requirements can look to data centers for progress in these areas. “Data centers, which are critical to the operations of financial firms, consume massive amounts of energy and contribute significantly to carbon emissions,” we reported previously. Fortunately, “financial firms can implement various strategies to optimize the energy consumption of their data centers.”
For example, financial firms can prioritize data center resources that use advanced cooling technologies, such as liquid cooling methods, to manage the heat generated by high-density computing environments.
Renewable energy adoption is rapidly accelerating among data centers as well, providing new channels for greater sustainability among firms. “The top five hyperscalers — Amazon, Google, Meta, Microsoft and Apple Inc. — have a combined renewable portfolio totaling over 45 GW around the globe,” S&P Global reports. “Roughly 57% of the global corporate wind and solar capacity tracked by S&P Global Commodity Insights is tied to just these five companies.” Many institutions are partnering with data center providers that utilize sustainable energy sources like solar, wind, and hydroelectric power as a result.
5. Massive Data Center Expansion
As financial firms embrace AI and machine learning for tasks such as fraud detection, risk assessment, and personalized customer services, the need for robust infrastructure capable of handling vast amounts of data has skyrocketed. Hyperscale data centers are massive facilities, typically exceeding 100MW in capacity. They offer greater scalability to meet the growing demands of AI-driven operations and big data analytics.
Key advantages for financial firms include:
- On-demand scaling: Financial institutions can rapidly expand their computing resources to meet fluctuating demands without significant capital investments.
- Proximity hosting: By locating near major financial hubs, these facilities reduce latency for high-frequency trading and real-time transactions.
- Enhanced security: Advanced cybersecurity measures protect sensitive financial data and ensure regulatory compliance.
- Sustainability: Many hyperscale facilities incorporate energy-efficient technologies and renewable energy sources.
The shift towards hyperscale solutions is also driven by the growing competition from tech giants entering the financial sector. Companies like Google, Amazon, and Apple are leveraging their extensive data infrastructure to offer financial services, pushing traditional firms to adopt similar capabilities to remain competitive.
How to Take Advantage of Hyperscale Data Centers
To leverage the benefits of hyperscale data centers, financial institutions must carefully plan their infrastructure strategy and select the right partners. A thorough understanding of the benefits and challenges is essential.
- Assess long-term computing needs: Project future data processing and storage requirements to determine the appropriate scale of infrastructure.
- Evaluate hyperscale providers: Research and compare different hyperscale providers based on their service offerings, location, and security measures.
- Develop a migration plan: Create a detailed plan for migrating applications and data to the hyperscale environment.
- Implement robust security controls: Ensure that the hyperscale environment meets stringent security requirements, including data encryption and access controls.
- Optimize for performance and cost: Continuously monitor and optimize the performance of the hyperscale environment to ensure cost-effectiveness.
Start Embracing Data Center Transformation
As the industry evolves, those who successfully integrate these technologies will be best positioned to deliver innovative, efficient, and secure financial services that clients and customers demand. Providers who have committed to making progress in one or more of these areas are attractive potential partners for tech-savvy financial firms as a result.
Option One Technologies Can Help
Option One Technologies is a leading provider of technology solutions, consulting, and support for financial institutions. Contact one of our experts today to learn more about the opportunities Option One provides.
