Financial Services Report

The big shock in the EMC Big Data League was that the financial services sector had the lowest scores across the board. The financial services (FS) industry is one that has always pursued technical supremacy. After all, a faster trading platform, lower latency transactions or better financial modelling means competitive edge. But after years of financial crisis and attempted reforms to improve the transparency and understanding of risk exposure in FS, the sector as a whole appears to be struggling to align its infrastructure, skills and leadership with the opportunities of big data.

In a survey of FS decision makers in the UK, conducted by Opinium Research for EMC, the sector demonstrated both a lack of data insights at speed and a lack of data prioritisations for the future. Although 56% of FS decision makers recognised the potential to drive revenue streams and better understand customers, almost half revealed that their IT infrastructure can’t move fast enough to enable the business to make better use of data. Though respondents of the self-assessment survey may have been harder on themselves than other sectors, typically already under greater scrutiny than any other sector, the survey reveals significant gaps in understanding and ability across the sector.

Leadership, skills and culture

The survey was supported by research into five of the FTSE100 companies in each sector[1], revealing that UK banks and insurance firms are not fully grasping the opportunity to use data to provide better products and services to customers. The latest annual reports of Barclays, Prudential, Lloyds Banking Group and Royal Bank of Scotland focus on improving services, delivering value for customers and shareholders and continuing progression post the financial crash. Although there are mentions of data analysis, aggregation and reporting due to regulatory requirements, there are few examples of big data analytic implementations to support cost effective improvements to service. Breaking the mould was HSBC, which demonstrated its commitment to data analytics to better understand rich data and prevent fraud.

Understandably, 37% of decision makers raised compliance concerns as a barrier to making better use of data. Recent industry analyst reports demonstrate that the sector is struggling to comply with regulations and considerations from the Financial Conduct Authority (FCA) for recording data and procuring new technologies. These concerns suggest that a rethink to how initiatives and frameworks are embraced by workplace cultures is required to support compliance and efficient use of data. The right skills and relationships with colleagues, suppliers and consultants will better position the FS sector for growth.

Skills and skills sharing are also a key part of the discussion for businesses looking to use data to get ahead. Though 66% of FS organisations have data analytics technical knowledge already, leadership teams need to join the dots between data use and how this can impact on products and services.

Infrastructure

A recent report from the European Financial Management and Marketing Association revealed that banks should focus their efforts on using data to provide better services to merchants, retail customers and other businesses – plus benefit from greater efficiencies. And yet, despite widespread recognition of the opportunity, only 14% of FS organisations have big data analytics in place, comparatively lower than the retail (35%) and public sector (40%).

Interestingly, though customer insights are the biggest driver for embracing data analytics, currently only 25% of FS decision makers have access to customer sentiment data and 27% to external data sets, including social media. Again these were the lowest levels amongst all sectors. Working across business units and securing access to customer data is the first step, but a broader commitment to working across business silos and ensuring both structured and unstructured data can be analysed between business functions is crucial in understanding the market and new opportunities for growth. Within this, it’s great to see that 42% of financial decision makers are adopting IT development strategies to collaborate on data with multiple teams, but this is well below the collaboration already taking place in other sectors, in almost 60% of retail organisations and 51% of public sector.

Technology is shaping our advances more than ever and now is the time to invest in systems which will underpin the business as a whole. Avoiding short term CapEx in the interest of cost savings could well result in long term losses and the eventual decline of any business.

As a heavily regulated industry, the financial services sector is understandably cautious in its approach to new technologies and the associated risks. However, it is this overly cautious approach that could bring the sector under further customer and investor scrutiny, if it continues to innovate at a slow pace. With new players and services constantly entering the market, action needs to be taken now to embrace the data revolution. Only then will longer term revenue streams and cost saving opportunities start to become reality – opening up the opportunity to take on the retail sector success.

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About the Research

Research was conducted by Opinium Research on behalf of EMC, online, amongst directors and IT decision makers in companies of 250+ employees in financial services, retail, IT, telecoms and media, manufacturing and the public sector. Participants were invited to participate based on pre-existing profiles and then also passed through rigorous screening questions to qualify. All respondents who completed the questionnaire were incentivised. After fieldwork the data was cleaned and analysed and turned into data tables and a written report. To create the additional league table, the raw data was used to allocate scores to each respondent in three areas: leadership and culture, skills and infrastructure as well as an overall score. The scores of the respondents in each sector were then averaged to provide an industry average in each of the three areas as well as an overall score – this was then used to create the league tables of sectors. Desk research to supplement the survey data was completed using publically available annual reports from the FTSE 100 and public sector departmental reports available online.

[1] Royal Bank of Scotland, HSBC, Lloyds Banking Group, Prudential and Barclays investigated as part of FTSE100 research