Waheed Mahmood, Financial Services Lead, Rackspace Technology
In today’s banking industry, the ability to access high-quality data in a timely manner has become a key differentiator for leading institutions. However, as the volume and variety of data collected by financial institutions continues to grow, managing this information has become increasingly complex.
One of the most significant challenges that financial institutions face is data silos. These are isolated data repositories within organisations, often spread across multiple databases and disconnected from other departments in the business. A report from WBR Insights and FIMA highlighted that 54% of financial institution leaders consider data silos to be a barrier to their digital transformation efforts.
Data silos often arise from bank mergers and acquisitions, but there are further complications when legacy data is introduced from various markets and clients. Many financial institutions are also still heavily reliant on outdated IT systems which are ill-equipped to handle the complexity and volume of modern data.
To remain competitive, leaders in financial services must focus on eliminating these silos. This involves integrating business and technology teams to align product and business processes. An effective way of achieving this is by leveraging the capabilities of private cloud technology.
Why are data silos a problem for financial institutions?
Data silos within a financial institution can harm various aspects of an organisation’s customer experience, operations and compliance if left untreated.
Customer experience (CX), for example, is fundamental to a financial institution’s long-term success. According to a report by EY, banks are facing a significant shift in customer expectations, with an increasing preference for usable interfaces and personalised and secure experiences. However, despite this, a report from Forrester highlighted there has been a significant decline in EU bank customer experience quality in 2024. This is exacerbated by data silos, as they make it difficult to get a complete view of the customer to then personalise their experience.
Furthermore, data silos can contribute to operational inefficiencies within financial institutions. According to a recent study by IDC Market Research, companies experience a 20-30% loss of potential revenue each year due to inefficiencies created by siloed data. The lack of data integration prevents access to real-time data, hindering the decision-making process and response times. This diminishes a firm’s competitiveness in a rapidly evolving financial landscape. With AI becoming more pervasive, institutions will struggle to leverage AI responsibly and safely if the data is not in a fit-for-purpose state.
Lastly, data silos make it more difficult for banks to fulfil the demands of financial regulators for more detailed data and precise data collection. The fragmented nature of the data across various systems and departments complicates these efforts. Attempts to bridge data gaps with new software can worsen existing data confusion, as they may not seamlessly integrate with existing systems. This limits financial institutions’ ability to gain a comprehensive view of their data which could potentially lead to compliance issues.
Leveraging Private Cloud Solutions to Overcome Data Silos
Leveraging private cloud solutions offers a strategic approach for banks to overcome the challenges presented by data silos. By consolidating data from various locations into a centralised, private cloud-based data platform, employees across different departments can access and share data in real-time, allowing them to meet regulatory demands and minimise compliance issues. Furthermore, this data freedom allows institutions to axe egress charges whilst benefitting from usage of capabilities across cloud providers.
Enhanced data flow within a private cloud environment can also provide banks with a comprehensive view of their operations. This holistic perspective enables them to identify and resolve issues before they disrupt services, therefore enhancing operational resilience. With this improved visibility, banks can make more informed decisions faster, optimise processes and adapt to market changes.
In addition, the scalability of private cloud infrastructure allows for efficient and rapid analysis of increasing data volumes to aid customer personalisation. Private cloud solutions also offer robust security safeguards to protect sensitive customer data during processing and storage. This ensures compliance with strict industry regulations such as GDPR in Europe, therefore maintaining customer trust and loyalty.
Accelerating Cloud Adoption for a Competitive Advantage
Ultimately, tackling the issue of data silos is crucial for financial institutions to remain competitive. Private cloud technology is a critical tool for banks looking to dismantle data silos, as they can enhance their operational efficiency and improve customer experience, as well as promote data-driven decision-making.
Nevertheless, to fully harness the cloud’s potential, banks must ensure organisational buy-in. Now is the ideal time for banks and financial institutions to accelerate their cloud adoption strategy. More companies must acknowledge the advantages of unified data, particularly as regulatory demands cannot be met by the capabilities of legacy systems.
