How smart data drives agility in financial services
Delivering reliable, clean, timely data into the hands of decision makers is vital for financial institutions. While this has been true for quite some time, data is becoming more important than ever. The events of the past year have irrevocably demonstrated this point, with financial intuitions realising just how powerful accurate data is when it comes to making pivotal decisions.
Adding to this complexity is the explosion in the amount of data we’re creating. You only need to revisit this mind-bending stat from TechJury to realise just how much we’re producing: “1.7MB of data is created every second by every person during 2020. In the last two years alone, an astonishing 90% of the world’s data has been created. 2.5 quintillion bytes of data are produced by humans every day.”
What does this increased focus on data mean for financial institutions?
1. The cost of managing data is only going to increase
The amount of data is growing, and with that comes growing costs associated with accessing, ingesting, processing, and storing that information.
More data means more throughput and more storage, both of which you’ll pay for. And if you haven’t got systems in place to handle the increase in throughput, you’re going to experience delays. This can not only cause reputational damage, but can also have regulatory and compliance impacts if you don’t have appropriate systems in place to meet your obligations.
In addition, if you don’t have a good handle on your data management activities, then you can end up with duplicate information across multiple silos which can be costly to wrangle and maintain.
2. It’s becoming harder to compete with emerging players
There’s certainly a benefit to having an established business in that you’ve got insights at scale. With that comes the weight of managing legacy systems and architecture. New market entrants on the other hand are starting with a clean slate. They commence with more agile data structures that give them a lot more freedom for application changes and allow them to keep data wrangling to a bare minimum. The more information we pour into our systems, the harder we have to work to be agile.
3. Customers now expect smart insights
We’re all driven by the technology that powers our lives. And today’s customers expect financial institutions to mirror the intelligent insights that our smart watches and apps deliver to us. There’s a growing expectation that if our watches can tell us the how we can improve our health through personalised exercise goals, sleep reminders, and mindfulness breaks, then surely our banks can tell us how and when to optimise our portfolios, how to increase savings, or how to maximise lines of credit.
If you don’t have a good handle on how to use your data to provide intelligent insights, your competitors are going to figure it out and monetise this for their own gain.
4. Data is essential for people to do their job
In the workplace there’s an expectation, particularly among those coming out of business school, that people will have access to the information they need to do their jobs. And that this data will allow them to not only figure out how to do their jobs well, but also give them the freedom to innovate outside of their role in order to grow and advance the business. Data has become an integral part of doing business. We are rapidly moving beyond just making sure we have the data, and it’s now more about how reliable and accessible it is that makes the difference to employees.
Beyond breaking silos
There are many views on how organisations can improve movement and quality of information. However, some of these approaches can create their own issues.
For example, many organisations create a data lake or warehouse with the intention of breaking down data silos. However what can happen is functional areas have different needs and the data can be of different types, and without strong governance we see more than one data lake or warehouse being implemented. Sometimes this just happens through acquisition and we are back with multiple data sources and with even more silos.
Financial institutions need to move beyond breaking silos and focus on timely, clean, quality, solutions around data catalogues. This will allow them to map out the entire data needs of the organisation. In short, they need to consider the connectivity of their information — how their data can be shared seamlessly across the whole data ecosystem. It’s what we refer to as “data fabric”.
What is data fabric?
Data fabric is an architecture and set of data services that provide consistent capabilities across a choice of endpoints spanning multiple on-premises and cloud environments.
Gartner describes it as “frictionless access and sharing of data in a distributed network environment.” In very simple terms it’s a layer that sits above all of the firm’s data assets (and respective management systems) ensuring they all speak the same language.
How smart data fabric is driving agility in financial services
Implementing a smart data fabric allows financial institutions to make better use of their existing architecture because it allows their existing applications and data to remain in place. It then integrates, harmonises and analyses the data in flight and on-demand to meet a variety of business objectives.
Having a smart data fabric allows financial institutions to remain agile in a number of ways:
Allows businesses to make smarter decisions faster
Change is the only constant, and this also applies to your business model. Not so long ago, business model disruption was something that might occur over a decade or two. Now it happens substantially faster.
Banking is seeing new market entrants the likes of gaming companies, retailers, transport and telcos, all clambering to get in on the financial services game. A well-constructed data fabric empowers executives and lines of business to monitor and anticipate changes, both positive and negative, in internal and external environments.
Helps identify new segment opportunities
The pandemic inflicted a range of impacts on financial markets and services. Two notable examples are the boom of the retail investor playing the equities market, and the forced closure of branches which resulted in a rise in uptake of digital channels.
One of our customers anticipated the impact of distressed debt amongst their credit card consumers and utilised their data fabric to proactively contact potentially affected clients. By offering extended payment terms they fostered stronger customer loyalty and mitigated a potentially large bad debt situation. This same process of customer segmentation can be used to identify new market opportunities and personalise new offers and products with a much higher success rate.
Enhances customer experience
A smart data fabric allows faster processing of clean reliable data which financial institutions can use to share insights with their customers. Some examples might be sharing insights about overspending in a particular category, notifying a client about overcharging (whether deliberately or by accident), or flagging better deals elsewhere. By sharing these insights, financial institutions can foster loyalty and drive spend in a highly-competitive environment.
We also know that high-touch services cannot be applied broadly. Directing this focused customer experience to the areas that will yield the greatest return will improve customer experience while reducing spend and improving margins.
Drives efficiency and cost savings
A data fabric can help reduce the cost of data access in a number of ways. Firstly, the potential reduction in silos and duplicated data. Secondly, making data verifiable, valid and complete. The cost associated with cleansing and mapping the data can be reduced if performed consistently and closest to the source.
And finally, making decisions based on timely, accurate data allows financial institutions to reap all the benefits just described. Without the certainty that comes with reliable data, none of these decisions can be made efficiently or cost-effectively because the time and effort associated with managing data simply outweighs the benefits.
Time to prepare
The benefits of reliable, accessible data are well-known among financial institutions. However, the growing volume and increasing complexity of data is making these benefits more elusive.
Leading financial services organisations are leveraging smart data fabrics to power a wide variety of mission-critical initiatives, from scenario planning, to modelling enterprise risk and liquidity, regulatory compliance, and wealth management.
To learn more about how we can support harmonising strategic initiatives for your business, reach out to me on LinkedIn or get in touch.
