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Investment and innovation: the route forward for financial services firms

Investment and innovation: the route forward for financial services firms 35

By Tim FitzGerald, UK Banking & Financial Services Sales Manager, InterSystems

The number of critical challenges facing financial services firms is on the rise. The introduction of regulations such as the Payment Services Directive (PSD2) and Fundamental Review of the Trading Book (FRTB) comes during a period of market volatility which COVID-19 has only increased.

Adding to these issues is the fact that many financial institutions finding it increasingly difficult to get a handle on the vast volumes of data at their disposal. As an industry that has typically only invested in new technology when regulations deem it necessary, many traditional banks are now operating using legacy systems and applications that haven’t been designed or built to interoperate. Therefore, they are struggling to leverage data to gain a clear picture of their organisation and processes in order to comply with regulatory requirements, and to achieve business goals. The pandemic multiplied these challenges as financial services firms had to adjust operations to keep up with radical changes in customer behaviour – all while working largely remotely themselves. They also face an increasing demand for digital services, with the IDC predicting that the global “datasphere” will expand to an astonishing 175 zettabytes of data by 2025 – more than five times the amount of data generated in 2018.

Financial services firms looking to keep pace with the evolving nature of the industry, meet the growing demand for more online services, and escalating requirements from regulators must start taking action now. Investing in the technology and processes that will allow them to more easily manage the data that traditional banks have been collecting and storing for upwards of 50 years comes first, then they must get ready to innovate.

High-quality data analytics

As new regulations require the analysis of larger data sets within smaller processing windows, breaking down any and all data siloes is essential. Those financial institutions that are still reliant on legacy systems will need to implement new technologies to meet the regulatory stipulations.

Here organisations will be looking for ways to achieve a faster and more accurate analysis of real-time and historical data no matter where they are accessing the data from within smaller processing windows to keep pace with regulatory requirements. They will find success using solutions offering high-quality data analytics and enhanced integration, which will be crucial to eliminate data silos and enable low infrastructure costs.

This technology will also play a huge part in helping financial institutions scale their online operations to meet demand from customers for digital services. According to PNC Bank, during the pandemic, it saw online sales jump from 25% to 75%. It all means having data platforms that are able to handle surges in online activity is becoming increasingly important.

Deeper, wider insights

Tim FitzGerald

Tim FitzGerald

The more data organisations are storing on legacy solutions, the more they are going to require an updated data platform that can handle real-time analytics. Those that have fewer legacy systems are likely to require solutions that deliver enhanced interoperability to help provide a real-time view across the business and enable them to meet the pressing regulatory requirements they face. The fact is, moving transactional data to a data warehouse, data lake, or any other silo will never deliver real-time analytics.

This means financial services firms require a data platform that can ingest real-time transactional data, as well as from a variety of other sources of historical and reference data, normalise it, and make sense of it. The ability to process transactions at scale in real-time and simultaneously run analytics using transactional real-time data and large sets of non-real-time data, such as reference data, is a crucial capability for various business requirements. For example, powering mission-critical trading platforms that cannot slow down or drop trades, even as volumes spike.

Having access to real-time data will enable financial institutions to meet evolving regulatory requirements and support faster and more accurate decisions for their organisation and customers. With many financial services firms operating on a global basis, this is vital to help them keep up not only with evolving regulations but also changing circumstances in different markets in light of the pandemic. This data can also help them understand how to become more agile, help their employees become productive while working remotely, and how to build up operational resilience. These insights will also be vital as financial institutions need to consider the likelihood of subsequent waves of the virus, allowing them to gain a better understanding of what has and hasn’t worked for their business so far.

Meeting changing requirements

Traditional institutions need to innovate to avoid being left behind, a reality highlighted with the launch of more digital-only banks and the impact of COVID-19. With more than a third (35%) of customers increasing their use of online banking during this period, it is those banks and financial services firms with a solid online offering that have been best placed to answer this demand. As financial institutions cater to changing customer requirements, implementing new technology that provides access to data in real-time will help them to uncover the fresh insights needed to develop new and transformative products and services for their customers. In turn, this will enable them to realise new revenue streams and potentially capture a bigger slice of the market. For instance, access to data will help banks better understand the needs of their customers during periods of upheaval, as well as under normal circumstances, which will allow them to target them with the specific services they may need during each of these periods to not only help their customers through difficult times but also to ensure the growth of their business. Using data to fuel excellent customer experiences will be essential for financial institutions looking to keep pace with and gain an advantage over their competitors.

In the current highly challenging environment, financial services must take action to meet changing requirements. With COVID-19 likely to be the biggest catalyst for financial institutions to digitally transform, they will be better able to cater to rapidly evolving landscapes and prepare for continued periods of remote working. To meet the needs of consumers in an increasingly digital landscape, replacing legacy systems with innovative and agile technology solutions will be crucial to ensure they can gain the accurate and complete view of their enterprise data they need to comply with new and changing regulations.

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