Introducing Rafael Bloom
Rafael Bloom is a Partner at Digital Works Group, specializing in strategy, innovation, and governance. With deep expertise in finance and emerging technologies, he brings sharp insight into how digital infrastructure and data systems shape industries like high-frequency trading, finance, and AI.
For today’s digital-first banks, poor network performance is much more than an IT problem: it’s a business risk. 73% of all banking interactions worldwide take place through digital channels, meaning financial institutions must deliver seamless digital banking experiences—or face steep financial consequences.
Since digital channels are the primary interface for customer engagement, network infrastructure should be treated as a long-term business investment. At the same time, institutions must navigate a complex regulatory landscape. In this environment, secure, scalable infrastructure is foundational. But how do business leaders frame compliance-related infrastructure as a non-negotiable business cost?
This article discusses how to achieve cost savings and maintain compliance with strategic network infrastructure choices, particularly in transceiver selection. We’ll explore the financial impact of poor digital banking experiences.
And we’ll cover how to evaluate network infrastructure investments, together with key considerations in vendor selection. To examine these challenges and decisions in more depth, we’ve gathered insights from Partner, Strategy, Innovation & Governance expert, Rafael Bloom.
The Compelling Case for Connectivity
Most banks and financial institutions recognize the need to deliver seamless and reliable digital banking services. To achieve this, data center connectivity that supports real-time transaction processing is essential. But while many modern institutions grasp the strategic value of optimization, more traditional firms may not. And that can be a costly oversight, as Bloom points out:
“Spending has to be accompanied with some kind of ROI. There is also a clear relationship between customer experience and loyalty. If your shiny new banking app is always falling down or is painfully slow then you will lose customers to slicker operators.”
Beyond improving customer satisfaction and retention, upgrading data center connectivity offers tangible business benefits. These include reducing latency, enhancing system resilience, and lowering operational costs over time. Though the initial outlay may be capital-intensive, it can lead to scalability and efficiency gains in handling growing transaction volumes.
Being an early mover can improve the total cost of ownership. Institutions that modernize ahead of the curve benefit from economies of scale and negotiate favorable vendor contracts. They also mitigate the risks associated with outdated infrastructure, such as outages, security vulnerabilities, and regulatory non-compliance.
With this in mind, any cost-benefit evaluation for upgrading data center connectivity should form part of a broader digital transformation strategy. One that includes the long-term value of trust, loyalty, and market competitiveness as well as financial ROI.
Poor Network Performance: Cost and Prevention
Network performance is a foundational pillar of digital banking. Yet its impact on financial performance is often underestimated. Service disruptions, slow transactions, and latency issues quickly erode customer trust and are accompanied by measurable financial cost. According to Splunk’s August 2024 report, global financial services firms lose on average $152 million per year due to downtime. Approximately $37 million stems from lost revenue, with the remainder tied to regulatory fines and remediation expenses. Bloom adds:
“Network performance issues in digital banking can have severe financial implications, directly impacting customer experience, revenue, and reputation. Slow or failed transactions due to network latency or outages directly lead to lost revenue, and even a shrinking customer base as they leave for more reliable players.”
Poor digital performance doesn’t just damage a brand’s reputation. It drives customer churn, support needs, and remediation costs while increasing operational burden. Replacing lost customers is more expensive than retaining existing ones, too.
For CFOs, this makes a compelling budgeting case for robust network infrastructure. Rather than seeing it as an IT expense, infrastructure should be treated as a core business investment in customer experience, risk mitigation, and long-term revenue protection. Proactive commitment to network performance prevents costly downtime and reduces churn. It also improves cost-efficiency across the customer lifecycle.
For these reasons, budgeting should include ongoing monitoring, resilience planning, and future-proofing for growth, as well as capital costs of modern infrastructure and redundancy. In the current digital banking climate, high-performance connectivity is no longer a nice-to-have: it’s a revenue safeguard.
Calculating Network Infrastructure ROI for Compliance
Unlike expenditure with immediate revenue upside, functions like regulatory reporting, data backup, and disaster recovery are more about risk mitigation. They focus on compliance assurance and long-term resilience. Which is why CFOs often struggle when calculating the ROI of secure, high-bandwidth network infrastructure. This is why ROI is often realized in avoided losses rather than profit. Bloom notes:
“The reason for this is rather like when buying Insurance: its true value only becomes realized when something has gone wrong. Regulatory reporting, data backup, and disaster recovery all cost time and money - and you only know what the cost is if you get fined by the FCA or if you are not able to trade for a period of time.”
For regulated institutions, however, this type of infrastructure is foundational. The cost of compliance must be seen in the context of evolving regulations and future-proofing. A scalable, secure, high-performance network ensures an institution is audit-ready and equipped to handle future regulatory demands.
CFOs and risk officers should frame investments as strategic safeguards. While traditional ROI metrics are difficult to apply, institutions can still assess value through scenario analysis. For example, quantifying potential loss from non-compliance or downtime against the cost of proactive investment. Network infrastructure then becomes a form of operational insurance.
A Framework for Evaluating Network Infrastructure
Compliance with frameworks like the Digital Operational Resilience Act (DORA) and regulatory requirements such as the Financial Conduct Authority (FCA), or Securities and Exchange Commission (SEC) demands both proactive infrastructure planning and resilience. Beyond comparing upfront costs, assessment also requires aligning infrastructure choices with long-term business objectives.
To ensure the right decisions are made, leading firms adopt a structured, best-practice approach to infrastructure evaluation. These practical evaluation frameworks typically include:
1. Business Impact Assessment
Identify how connectivity upgrades support key business goals such as transaction speed, service availability, customer experience, and compliance. Map out operational pain points (latency, downtime, scalability issues) and quantify the business impact.
2. Cost vs. Value Analysis
Compare TCO across options. Consider operational efficiencies, potential cost avoidance (downtime, fines), and future scalability along with capital expenditure. Include opportunity costs and potential revenue uplift from improved performance.
3. Risk Mitigation Evaluation
Assess how each option mitigates regulatory risk, reputational harm, and operational disruption. Ensure alignment with regulatory frameworks like DORA and internal risk appetite thresholds.
4. Vendor and Technology Fit
Evaluate the flexibility, interoperability, and roadmap of potential vendors or technology platforms. Consider early-stage investments: do they lock you into costly upgrades or offer long-term agility and negotiation power?
5. ROI Timeline and Performance Metrics
Establish clear KPIs to measure performance improvements over time (latency reduction, increased uptime, decreased support calls). Align with projected ROI timelines and regularly review post-implementation.
By following this structured evaluation process, institutions can make informed, forward-looking decisions that balance financial return with operational resilience.
Cost Savings vs Risk Trade-Offs: Choosing the Right Transceivers
When it comes to core banking infrastructure, every component contributes to performance, resilience, and compliance. Transceivers are one such component, key to ensuring reliable data transmission across systems. Their cost and sourcing can, however, impact both operational budgets and infrastructure risk.
Which is why when evaluating transceivers, cost savings must be balanced with risk: especially with growing regulatory scrutiny from frameworks like DORA.
So, what are the key differences between OEM-branded, reputable OEM alternatives, and low-cost third-party transceivers?
OEM-Branded Components
OEM products are often perceived as the safest choice, but they come at a premium. They can also tie institutions into expensive vendor lock-in. Firms must ask: Is the premium or the long-term dependency justified? Or are there smarter alternatives that deliver the same reliability, performance, and compliance at a lower cost—and with greater flexibility?
Budget Third-Party Transceivers
Low-cost, unvetted third-party options might introduce operational risk, which can be disastrous in a regulated and transaction-intensive environment, like banking and High-Frequency Trading. They may not meet required performance specs, present compatibility issues if they are not 100% tested with OEM switches and could even be a vector for firmware manipulation or embedded security risks.
Reputable OEM Alternatives
Trusted optic providers like ProLabs provide a compelling middle ground, offering significant cost savings without compromising performance or compliance.
Our solutions bridge the gap between performance, compliance, and cost-efficiency. By offering dependable, certified alternatives to vendor-branded products, we enable banks and financial firms to build resilient, future-proof network infrastructure that supports real-time transactions and digital service excellence. According to Bloom:
“Having a measure of control by making certain key choices not only saves money without adding risk but also can keep a vendor ‘on its toes’ where it comes to delivering other core banking infrastructure elements.”
Through class-leading testing, ProLabs ensures financial institutions meet their regulatory requirements with confidence. Customers get OEM-grade performance at a lower cost, achieving parity with OEM modules without their premium. They also avoid vendor lock-in with a solution that offers flexibility to diversify hardware supply.
Strategic Infrastructure Choices for a Resilient, Cost-Effective Future
Modernizing network infrastructure is not just about upgrading systems. It’s about enabling growth, managing risk, and strengthening customer trust. As financial institutions navigate digital transformation and regulatory pressure, infrastructure decisions become business-critical. Every component matters.
By partnering with trusted providers like ProLabs, firms can achieve significant cost savings without sacrificing performance or compliance.
The result: future-focused infrastructure choices that best position firms to thrive in the digital economy of tomorrow.
Ready to start building a more resilient, cost-effective network? Contact the ProLabs team or request a quote today.
