By Ivo Ivanov, Chief Executive Officer of DE-CIX International
Modern society simply could not exist without the means to measure things. The civilisation of the 21st century would be inconceivable without the indispensable measurement tools on which our everyday life depends. To understand the dimensions of a box, a tape measure can be used. A scale is used to measure the weight of a bag of apples. The size or weight of an object in this instance could very much determine the value and/or price of the object.
How about this article? How do we measure the speed of how fast it loaded on your desktop or smartphone? How is the speed of the ‘loading time’ defined or measured? The measurement of this is called latency. Latency is defined as the time it takes for a data packet to travel from a device connected to the Internet, such as a smartphone, to a server on the Internet, and back again. The lower the latency, the faster the response, and the better the performance of content and applications, and ultimately the user experience. Therefore, latency is a measurement that can quickly influence revenues for digital companies.
From the length of time needed to carry out your online banking to simple reads like this article, fast respose or loading times could very well determine the likelihood of a happy or a repeat customer. On the other side of the coin, slow loading times can only mean disgruntled users who bring this to light by means of social media.
How does one improve the latency of digital services, applications, or content? We first have to understand what causes latency. Basically, the further data has to travel between your device and the server where the content or applications you want to access is housed, the higher the latency and the longer the loading time will be. Therefore, the pathways that data travels through on the Internet need to be optimized so that the data can flow very efficiently via the shortest route. An effective way for network operators and digital companies to achieve this is through what we call “peering”. Peering is basically one method through which two networks interconnect and exchange traffic with one another, and it is done by directly connecting with the network you want to exchange data with via an Internet Exchange (IX). Peering at an Internet Exchange (IX) allows one network to connect to numerous other networks via a single connection, optimizing the data flow and enabling the shortest routes between networks.
For a company to achieve the best results with peering, an IX should be chosen that is as close as possible to the company location. This results in local data exchange with local partners, keeping the latency as low as possible and improving overall performance. Improving overall network performance for end-users will subsequently affect the business’s reputation. Businesses will also be able to better understand their routing patterns and transfer data traffic more effectively, resulting in a more complete network distribution pathway for optimum service to their end-users. Peering will, in fact, reduce expenses for businesses by removing the need to pay transit costs, while also giving businesses access to a larger pool of services, such as secure and direct connections to cloud services, and support from mutual peering partners in the case of disruptions to the connectivity.
Why is Latency the new currency in ensuring optimum vitality for business
According to the survey conducted by DE-CIX in Germany earlier this month, the market penetration of DFS reflects the needs for digital finance. Consumers feel the greatest advantage of DFS is time independence (68%), user-friendliness (66%) and location independence (58%). Consumers further highlight usages in-depth such as administration of debit/credit cards and other forms of payment is in the top position with (85%), followed by the management of personal income and spending (35%), investments (32%), and trade (22%). Some customers want services linked to taxes (24%) and insurance (24%).
Consider a situation that many Malaysians are familiar with; during the festival season, numerous local airlines frequently offer incredible rates for a limited time over their web presences. Often, the sites are well-built and have with the capacity to sustain large surges of traffic; yet, payments can only be processed through a secure connection that can only handle a limited number of concurrent payments, e.g. 100 purchasing users. Other users gripe overpayments that are not processed rapidly enough to indicate proof of purchase. Disgruntled users then reload the payment page to find that tickets are no longer available. This was certainly the case for many exciting concertgoers who have had similar frustrations when acquiring tickets to a much-anticipated show recently.
This is when latency can be measured in a monetary form, and becomes almost a currency in its own right. In such a context, latency is business critical for the business. Take, for example, Digital Financial Services (DFS). DFS are financial services such as financial apps for end-users to perform transactions in real-time, manage of personal income and investment. Everyday examples of DFS apps such as Maybank2u, HSBC Banking app and CIMB clicks are prominent examples in Malaysia.
The Covid-19 pandemic has further proved to the financial sector that digital channels are not only effective for their consumers but also necessary. However, institutions must keep in mind that when switching from face-to-face channels, consumers may have greater expectations for the convenience of use and functionality of digital banking. This is especially true for individuals who are attuned to using digital channels for online shopping, e-hailing, and food delivery in which interconnectivity and speed are essential.
This might be a problem for financial institutions that are burdened by traditional channels and conservative attitudes. Building digital channels, competencies, and the optimum competitive edge are now some of the biggest objectives for financial institutions that may not have invested as much in digital platforms prior to the pandemic.
Reliable Interconnectivity Back Bone For Economic Growth
The data on the market penetration of DFS that was collected in Germany, a generally very conservative market, demonstrates the potential that these apps will have in many different regions of the world. Southeast Asia is no exception. This is why good interconnectivity, peering and low latency is necessary for banks and financial services companies also in Malaysia. As many more industries, including the financial sector, adapt to digitalisation, the need for higher process efficiency, lower transaction costs and better control is priceless for the region’s economic growth. – Business Today