The success of Napster, the Internet-based music-sharing service, and similar endeavors is spurring the financial services industry to take another look at peer-to-peer computing for a wide variety of applications.
Peer-to-peer enables users to skip a middleman-a server for example-and draw information or computing power directly from other devices on a given network. The potential for banking runs the gamut from resource-sharing for compute-intensive applications to information sharing.
"What Napster showed the world is that millions of people were willing to share information. It was music files, but it could have been any information," said Ingrid Van Den Hoogen, director of marketing and business development for Project JXTA, a research venture incubated at Sun Microsystems to address the peer-to-peer space. "People were willing to give up some space on their hard drives and allow themselves to be accessible because they wanted that one track of music."
Peer-to-peer is the next wave for the Web, according to Rob Hegarty, director of investment management at TowerGroup. "It's the next evolution of how to leverage the Internet, because it's going to allow anybody who is on a computer to share information, data, resources, disk space or anything with another peer on the Internet."
While the Web allowed computer users to browse the Internet, peer-to-peer holds the promise of intelligently connecting all desktop computers with one another. "What it really does is allow users to become a little more passive in the way that they search for information and the way they look for additional resources, whether it's computing or storing," said Hegarty.
FIRST AMONG PEERS
In financial services, the securities industry has taken the lead in peer-to-peer. Through services like LiquidNet (which combines order matching and negotiation software with direct interfaces to some order management systems) and WorldStreet.Net (a relationship-based collaboration platform that allows financial professionals to share information and ideas in real time), the securities industry is taking advantage of peer-to-peer capabilities to enhance productivity.
"We haven't seen peer-to-peer adopted as much in the banking side as in the securities side," said Hegarty. "That's mainly because information overload is more of a problem in securities than it is in banking. It's a problem in banking, so it will get there, no question."
Wachovia Bank is using peer-to-peer technology in its trading applications. The Winston-Salem, N.C.-based institution is using WebProc, a software product from New York-based DataSynapse, to marshal intermittently idle and underutilized PCs in its capital markets areas and link those network resources dynamically to its trading application.
The bank turned to DataSynapse's solution to help business units derive additional revenue without incurring additional costs, noted Joe Belciglio, managing director of trading technology at Wachovia.
"We wanted to reduce the time required to perform portfolio-level analytics without the requirement of purchasing additional compute servers. At the same time, we wanted to free up programming resources that were maintaining internally developed distribution software and redirect those resources to more revenue-specific projects."
In terms of distributed computing, peer-to-peer technology can deliver three key results: address compute- and data-intensive application bottlenecks; harness virtually any distributed resource unobtrusively and invisibly; and maintain the security of distributed application code and data.
Peer-to-peer distributed computing can provide a 10 to 100 times performance improvement, for 10 percent to 20 percent of the cost of any alternative solution, said Peter Lee, CEO and cofounder of DataSynapse.
Risk management, asset/liability forecasting and straight-through-processing implementations are other areas of banking that could benefit from a peer-to-peer solution.
"Areas that are involved in data mining, portfolio analysis or credit analysis would clearly benefit from this technology," said Wachovia's Belciglio. The institution plans to leverage the technology throughout its trading platforms, as well as embed it in credit and market risk systems.