Connectivity in Financial Services: The Evolution is Underway

Few industries have been as fast and far-reaching as financial services in their response to the opportunities of the digital economy. Legacy connectivity models, once the cornerstone of the financial sector, now present challenges regarding speed, cost, flexibility, and security. The cracks are beginning to show. This article examines the role of Closed User Groups and the strategic shift that could disrupt banking operations.
Connectivity in Financial Services: The Evolution is Underway

Few industries have been as fast and far-reaching as financial services in their response to the opportunities of the digital economy. Neobanks, the rise in online banking services, peer-to-peer lending, mobile payment systems, equity crowdfunding, digital trading, cryptocurrencies, and blockchain are just a few of the relatively recent major innovations the sector has embraced. These transformational services underscore the continuing need for robust and reliable connectivity. Advances in AI, analytics, cloud processing, and regulatory changes are pushing traditional networking methods to their limit. The cracks are beginning to show.


Legacy connectivity models, once the cornerstone of the financial sector, now present challenges regarding speed, cost, flexibility, and security. Movements like open banking are a case in point. Europeโ€™s PSD2 regulation laid the foundations for the aggregation of financial services, the sharing of information (with consent) via APIs, and participation from non-financial players. Similar measures are now being debated in the US.

The choice and flexibility that comes with open banking make good sense from the consumerโ€™s perspective. For providers, it requires a fundamental shift away from traditionally isolated approaches to data towards an innovative connectivity model. As these digital businesses evolve, they are increasingly looking towards solutions like Closed User Groups (CUGs) that enable smooth, secure, and efficient data exchange with multiple partners. As well as the secure, speedy processing of data from many different sources, a key additional value component in the new data connectivity model is the ability of third-party providers to analyze data, with the subsequent insights made available in various systems and apps.

Whatโ€™s wrong with the current system?

While the banking sector has been agile in adopting many digital tools, its reliance on now-dated networking technologies, like Multiprotocol Layer Switching (MPLS), hinders its ability to adapt to the changing demands of its customer base. The success of MPLS centered around its ability to deliver speedy, secure connectivity when network traffic flow was steady and predictable. For the digital economy, dominated by cloud computing and the data-intensive technologies it supports, inherently variable traffic patterns are a given. In other words, one of MPLSโ€™s big advantages has now become a critical hindrance. MPLS can be optimized according to data traffic flow, but these configurations take time and are costly. Financial services companies need to move away from MPLS for use cases where network traffic needs to be handled with agility.

Private networking solutions are coming of age

The shifting regulatory landscape, as well as the ongoing evolution of AI, ML, and analytics, are opening up exciting new opportunities for the financial sector. They are all predicated on superior connectivity: the ability to flexibly scale, process, and exchange data securely. One option that is proving both viable and increasingly interesting is the Closed User Group (CUG).

Sometimes referred to as mini-internets, CUGs are private, bespoke networks within larger networks specifically designed around their constituent members’ needs: financial institutions and their partners and service providers. All members of the CUG enjoy dedicated connectivity in a secure environment by establishing direct pathways within larger network frameworks such as an Internet Exchange (IX).

Why CUGs are gaining ground

CUGs offer the privacy you would expect from MPLS and enable enhanced scale, security, and greater control, all while costing significantly less. Their ability to scale as needed and rapidly incorporate new partners makes CUGs ideal for cloud-based environments and data-intensive processes like AI, automation, and analytics.

CUGs offer enhanced control and security because they are effectively private networks in which the members set the rules on access and can more effectively monitor data patterns, protecting these environments from the usual external threats that affect wider networks.

The dual benefits of flexibility and security make CUGs an attractive option for financial services companies looking to evolve their network infrastructure and future-proof their digital investments while simultaneously complying with the stringent regulations governing security and privacy in the sector.

Whatโ€™s the future for CUGs in banking?

The increasing adoption of CUGs in financial services not only addresses the immediate need for scale, agility, speed, and security, it represents a strategic shift that will define and disrupt banking operations in the coming era. By embracing CUGs, financial companies are effectively laying the foundations for the next stage of modernization. It is a strategic move to ensure they can meet the future demands of the global digital economy.


Recent Content

Twelve major European telecom providers, including Vodafone and Deutsche Telekom, have jointly urged the EU to allocate the full upper 6GHz band (6.425โ€“7.125 GHz) for mobile use, citing the spectrumโ€™s critical role in future 6G deployment. With the U.S. and China already advancing in this area, operators warn that delays could jeopardize Europeโ€™s digital leadership and hinder next-generation connectivity infrastructure.
Dirty data in data centers undermines everything from AI accuracy to energy efficiency. With poor metadata, data drift, and dark data hoarding driving up costs and emissions, organizations must adopt DataOps, metadata tools, and a strong data culture to reverse the trend. Learn how clean data fuels smarter automation, compliance, and sustainability.
The telecom industry in 2025 is undergoing a major transformation, driven by artificial intelligence (AI), cloud growth, next-gen cellular networks, and national data sovereignty. AI is reshaping cellular infrastructure, enhancing spectrum efficiency through innovations like ELAA (Extremely Large Aperture Arrays), and enabling smarter, adaptive networks.
Vodafone is expanding its role in the UK smart metering upgrade by providing fixed-line connectivity between energy suppliers and the Data Service Platform (DSP). This move complements its existing mobile network role and positions Vodafone as a critical telecom partner in the UK’s digital energy transition, helping to advance national net-zero and smart grid goals.
AI agents are transforming enterprise operations, acting as autonomous digital coworkers that enhance productivity, reduce costs, and support strategic decision-making. With a projected 327% growth by 2027, enterprises must adopt AI agents to remain competitive in an AI-first economy.
Whitepaper
Telecom networks are facing unprecedented complexity with 5G, IoT, and cloud services. Traditional service assurance methods are becoming obsolete, making AI-driven, real-time analytics essential for competitive advantage. This independent industry whitepaper explores how DPUs, GPUs, and Generative AI (GenAI) are enabling predictive automation, reducing operational costs, and improving service quality....
Whitepaper
Explore the collaboration between Purdue Research Foundation, Purdue University, Ericsson, and Saab at the Aviation Innovation Hub. Discover how private 5G networks, real-time analytics, and sustainable innovations are shaping the "Airport of the Future" for a smarter, safer, and greener aviation industry....
Article & Insights
This article explores the deployment of 5G NR Transparent Non-Terrestrial Networks (NTNs), detailing the architecture's advantages and challenges. It highlights how this "bent-pipe" NTN approach integrates ground-based gNodeB components with NGSO satellite constellations to expand global connectivity. Key challenges like moving beam management, interference mitigation, and latency are discussed, underscoring...

Download Magazine

With Subscription

Subscribe To Our Newsletter

Scroll to Top