by Adam D Wisniewski
Senior Manager, Orbium Management Consulting Services
It’s not news that data is the new oil. The Economist spelt that out back in May 2017. Certainly, the rush for riches based on data has catapulted some companies from start-up to global giant in a few short years. Amazon, Google, Facebook, Alibaba all come to mind. Worth billions, these companies – and others like them – mine customers for information and then refine it, store it, use it, monetise it. Looking ahead, data will become more valuable as we work out further ways in which to use it.
Nor is it news that traditional companies, such as banks, are swimming in data that they don’t yet know how to utilise. Banks may have teams of specialists making sure they’re monetising the oil markets, but it’s still rare to find a specialist doing the same thing with their proprietary customer data. Worse, data is still seen as a drag by many finance departments – something that helps banks meet regulations but adds no value. A cost, not an asset.
So here’s the new bit. Time is running out for banks to get with the data programme and start looking at it strategically.
Pressure is building from three sides: regulators, competition and customers. The regulators are getting ever-more prescriptive and technical when it comes to the data that banks must collect, how they store it and how they report it. I predict it won’t be long before they decide they want it in real time, too. Banks will have to comply, so they might as well work out how they can transform data into an asset.
A quick look at the neo and challenger banks, set up to be digital-first, will show them how. Both are using data to tightly tailor products and services to customer needs and wants, proving hugely successful and profitable thanks to the ability to scale quickly and at low cost.
Finally, banks need to make changes because their customers are increasingly expecting a new level of service. This expectation is hitting private banks particularly hard, where straight-through processing and digital services are far from standard.
In each case, data is the key. Collecting, labelling and organising it will help transform a bank from being under threat to being in peak condition.
But to get it right, a bank must do more than fill big databases with information demanded from and given by customers. It must have the right information.
This means looking across all its functions – not just compliance – to see what data they use and whether each could benefit from something different. An obvious example is the marketing department. Banks rarely make use of knowledge gleaned by one department – for example the sale of a company or another large asset. At these moments, the marketing department should spring into action, offering a customised service proposal. But it’s the same for finance, risk management and management and strategy. The more each department knows about its customers, the better placed it is to make decisions that will help the bank become more attractive and profitable.
Once a bank knows exactly what data every department wants, it can set about collecting it, keeping it up-to-date and ensuring collection evolves according to need – including with regard to new regulations.
Then it comes down to having the right data architecture in which to store it. This includes making sure that the data is in the right format for different users and applications to access and use according to their requirements. For example, not all data needs to be updated in real time – date of birth, address and historical investments must be recorded but don’t have to be on a highly dynamic fast-database, while balance and recent transactions do. The architecture must also be scalable; able to cope with the billions of pieces of data that can add value to a bank’s business.
Finally, it’s worth mentioning that growth brings greater regulatory scrutiny. The regulator is less concerned with a small bank than with one fast becoming medium-sized or large. So not only will effective data management assist growth, it will facilitate reporting, too. Real-time management and risk dashboards will become standard tools, allowing banks to know and manage risk.
In today’s world of data riches, the importance of state-of-the-art data management cannot be emphasised enough. This isn’t limited to a robust technical state, but also involves a deep understanding of the value of the data and its optimal use across the whole organisation. When a bank embraces this, it will be able to tap into a rich seam that will enable it to create and add value – not only for its shareholders but for its customers. That’s the kind of news everyone likes to hear.