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FINANCE

Three Ways Data Unlocks Business Value for Financial Organisations 

Three Ways Data Unlocks Business Value for Financial Organisations  44

 

 

Three Ways Data Unlocks Business Value for Financial Organisations  45

By Rinesh Patel, Global Head of Financial Services, Snowflake 

The financial services industry is in the midst of tremendous change. Consumer expectations have shifted and firms are adopting new innovations in data and technology to meet the broader needs of their customers. Increased regulatory change has led firms to re-imagine the ways they collect and process data to keep up to date with the evolving landscape. The competition that abounds from emergent fintechs is also providing an additional incentive for firms to rethink how they can drive business growth and opportunity. 

The financial services sector is highly data-intensive and the volumes of data generated in the industry has accelerated, as digital processes have magnified the information available about financial transactions and customer behaviour. This data is frequently created in individual departments, building up ever-increasing silos of information. When business teams need to collaborate with other teams, data is shared and often replicated across multiple teams, regions and departments causing friction and adding to costs and complexity in the movement of that data. Firms are not able to operate effectively without robust data governance, and therefore need to harness data to meet their future needs. 

Whilst data is the lifeblood of financial services workflows, functions and teams, the legacy technology architectures that firms are built upon is a constraint on businesses and can even lead to greater organisational risks. The challenges for many incumbent firms is that the infrastructure of the past is not built to capture the vast and evolving requirements of the financial industry where data can be accessed and turned into meaningful insights. 

Firms looking to modernise and monetise can do so by implementing an enterprise data strategy with cloud-native solutions. They can reposition themselves to accelerate time to market and value, with differentiated products and improved client offerings to gain a critical competitive advantage. Here we explore three important ways that financial services businesses are using better technology and enhanced data management to add business value. 

Regulatory Reporting 

The volume of regulations and reporting obligations of firms globally, have moved in one direction in the past decade – exponentially. And as a result this has created greater complexity and security challenges for firms capturing and processing such data. Many of these regulations were taken by supervisors to ensure financial stability after the financial crisis of 2008. Regulators have greater expectations on firms with the aim of risk mitigation and transparency. With advanced technologies facilitating data capture, storage and analysis now available, supervisory bodies are also keen in part, to ask for additional disclosures because it’s now possible to demand more documentation and seek greater transparency.

The landscape of differing interpretations, overlapping regulatory requirements across asset classes and geographies and strict, even unrealistic deadlines for implementation has forced customers to take tactical short-term quick-fix solutions, elevating operation risk and the chance of regulatory fines. Compliance departments have therefore been spending years building reporting processes, managing inconsistent data sets, maintaining aging data stores and importantly overseeing differing levels of governance, adding more cost and complexity to the given task in hand. For a large multi-segment global bank or asset manager this fragmented and manual approach to data management and analysis is not sustainable given the scale of processes and multi geographic considerations that they have to comply with.

As regulators continue to push the long term structural change agenda, financial services must now ready themselves to meet more robust reporting requirements to comply with the ever-changing regulatory landscape. The objective is to simplify and better manage data across teams with the governance and security provided by technological capabilities now offered through modern cloud capabilities to drive needed reporting. This will allow firms to replace old and inconsistent data with a centralised data architecture, providing a single source of truth. The time and cost reduction from data sourcing, ingestion, and the normalisation of data for analysis, can shrink to significantly streamline reporting processes.

Customer 360 experience

Consumers provide financial institutions with a vast amount of information, ranging from their banking habits to their behavioural preferences. Financial organisations have traditionally been slow to tap into the totality of this information to provide a better experience for customers.

The quest to provide greater visibility and a 360 degree view on customer behaviour is at the core of financial services organisations’ priorities for Customer 360 experiences. Customers want smooth, easy digital experiences that can speak to their desire for ease-of-use and convenience. This is increasingly seen in the ways virtual banking consumers have opted for technologies that are simple to interact with, are self-directed and frictionless when it comes to their overriding preference for carrying out digital transactions. New regulations, such as PSD2 and rules around open banking have also primed customers to expect more. 

The challenge for legacy institutions is to bring the ease and usability of digital first platforms with the sophistication of a major, global provider. Tapping into the full spectrum of data created by consumers is central to a successful transition. 

Wealth advisory, investment management professionals are increasingly looking at data capabilities to support ongoing relationship management with their clients. Using data to understand customers in this way helps banks to successfully move customers up the wealth value chain. Wealth management organisations can digitise the investment process – from finding customers to managing accounts, and offering bespoke plans. Effective use of data in this sector can free up time for advisors, helping to retain key customers and charge higher commission levels thanks to a new level of personalised service. 

Opening access to ESG metrics and reporting

ESG considerations have grown in significance with increasing stakeholder pressures, driving a response by firms to prioritise their sustainability agenda. To understand, evaluate the problem and take action, firms need access to technology providing holistic ESG data capabilities and solutions, with performance and scale. 

Financial firms are amassing large data sets from the public sector, including government reports, scientific bodies and private sector reports, to understand and address the climate challenge. Businesses are moving with urgency to acquire robust data sets, to meet ESG criteria and sustainability metrics needed to evaluate impact and make progress against their own commitments. Asset managers are using sustainability metrics such as exposure to carbon intensive businesses to make investment decisions. Banks are looking at ESG risks against corporate portfolios to understand impact on their valuation. Insurance firms are using ESG data to inform climate risk and transition risks when evaluating underwriting policies. There are several and pervasive business use-cases for teams experiencing ESG data challenges, including portfolio construction to financial planning and regulatory reporting that will require an effective ESG data management strategy. 

Ever present challenges in the ingestion, standardisation, and sharing of ESG data will be at the forefront of every organisation – as they process the magnitude of the challenge and transform their operations to address the issue. With cloud-native solutions firms can use ready-to-use query data across established marketplace data sets. They can then share that data across teams in a secure, governed way – with greater speed to market. Organisations can meet the need for scalable analytics, and access a data ecosystem to build their own proprietary ESG applications for different user and workflow requirements.

 

The way forward 

Data and technology investment will continue to grow to service the modern day requirements of the financial services industry. As organisations look to strengthen their operations for business value creation, they increase their value to all their stakeholders from employees, consumers, clients, regulators and the general public. This means adding value across the business to future-proof the organisation as they think about how to improve operational efficiency and efficacy, generate consumer appeal through enhanced customer experience or to mitigate risks. The path to business value creation will encapsulate business and digital transformation as firms modernise their operations with technology and data innovation found through cloud-native solutions.

Through data cloud technology, businesses are better equipped to react to future challenges and opportunities. Business can be at the centre of shared data ecosystems while maintaining the security and control they require. It will empower them to create the infrastructure that’s needed to survive in a changing industry and world.

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