Data-as-a-Service for Financial Services Firms: The How to Guide

Mark Hermeling, Chief Technology Officer, Alveo

 

The financial services industry has always been an information- business sector and it is increasingly so today. Financial data continues to grow in volume, diversity and complexity – and the number of data sets and sources these firms need is only growing. Yet the sector as a whole is still struggling to make effective use of all this data. A substantial amount remains underused. By some estimates, businesses use only 0.5% of available data, according to PwC.

That’s a major problem in financial services where a combination of poor data quality, inadequate  data controls and lack of easy access to data sets clashes with the need for data for improved risk management, more personalised customer engagement and regulatory compliance, which often necessitates the collection, management and use of data for reporting purposes. There is also greater scrutiny on the process of gathering data or reporting on it to clients, investors and to the regulatory authorities.

Given all this, it is not a major surprise that financial services firms often struggle to find the budget or the expert resource to manage this data efficiently themselves in-house. It typically puts a squeeze on internal operations and internal IT. Looking after staff who specialise in data tool set-up and management is difficult and can be exorbitantly expensive. Data management and processing costs can easily escalate out of control and the success rate of in-house development of infrastructural technology is low. Added to this, setup can take significant time – and productivity often suffers from downtime and other disruptions.

Mark Hermeling

Data-as-a-Service (DaaS) can be the answer. This is a services offering that uses third party technology wrapped with a data management service offering. Important here are the use of cloud-native technology to cater to the flexibility and elasticity firms require. Data can also be provided in different ways from screaming to scheduled batches in different formats to speed-up last-mile integration. Lastly, transparency into the “manufacturing” of the master data sets to explain data points and optimise data usage is critical within any data-as-a-service solution.

 

Reaping the rewards

For financial services firms wrestling with the complexities of managing data in-house, there are a raft of benefits to be had from switching to a DaaS model, whether they are concerned about responding to increased regulation looking to source additional data effectively, or simply want to improve the efficiency of their operations and cut costs.

By opting for DaaS, financial institutions can eliminate the day-to-day burden of data processing and platform maintenance that they might otherwise have to get involved in. Firms that opt for DaaS can instead concentrate their time and resource on their core revenue-generating activities, knowing that a full team of focused data management specialists can be in place  handling their operational challenges and data requirements.

Cost is a key area where DaaS offerings are well placed to deliver benefits but what other factors should firms be looking at when selecting DaaS solutions? Flexibility is one of the most important. Financial services firms should seek out offerings that enable them to quickly and easily connect with all the main global data vendors. It is equally key that the chosen solution ensures that when data is ready to be delivered, it is distributed to the users who need it, whether that be risk applications , regulatory reporting or code trading systems.

Ease of use is also key, of course. Solutions with intuitive user interfaces will make it easy for financial services companies to browse current or historical data or define new attributes requested by instrument or asset class.

By opting for a cloud-based data management solution, DaaS users gain further benefits. Typically, that will include reduced operational risk that comes from running a solution that is fully managed by a team of experts. Second, by using a cloud-deployed managed data service that easily integrates with market data platforms, they will automatically have a lower environmental footprint than if they were managing the data themselves in-house.

 

Through onboarding and beyond

Financial services companies may be concerned about having to deal with a protracted onboarding process of course but that does not have to be the case with DaaS. The simplest and most efficient approach will see the client able to select a data source and pick from a library of validation rules and data consumption options, with the provider then simply initialising the data hub to enable self-service data distribution.

Ultimately DaaS can help to initiate a completely new approach to data within a financial services firm. DaaS providers can help firms break down siloed information and be an expert data service bureau to the entire organisation. And DaaS helps every department in a firm with easy access to data and fast onboarding of data consumers, driving agility, fast and accurate decision- making and the operational efficiency that every financial services business needs.

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