HOW CLOUD COMPUTING CAN OFFER COMPETITIVE ADVANTAGE IN THE FINANCIAL SERVICES INDUSTRY

Matthew Glickman, VP Customer Product Strategy, Financial Services, Snowflake.

 

Over the last year, various banks in the UK have announced innovative new approaches as they look to further digitise their offerings and revamp their networks for the digital age. This is a significant moment for traditional banks, which have struggled to balance its regulatory and legacy tech challenges with a customer base that is increasingly looking for more agile, integrated services.

The shift from physical stores offers a glimpse into how the industry is focussing towards digital transformation and accelerating the move towards off-prem banking. Due to the sensitivity of financial data, digital transformation in the industry has been slower than in other sectors. While the industry has undoubtedly evolved and banks have come a long way in their approach to online and cloud-based banking, large-scale migrations to the cloud have remained a cause of contention.

The pandemic, however, created a need for financial institutions to operate off-site. This opened the door for hosting customer-related data in the cloud, as banks became one of the most enthusiastic adopters of cloud software to facilitate working from home. Rather than treating this as a short-term measure, financial institutions are realising the potential that the data cloud can offer, in enabling secure and scalable data storage that offers competitive advantage.

 

Here are three of the ways competitive advantage can be achieved.

Personalising Customer Experiences

The cloud offers companies the opportunity to house all their various types of data in one secure location, enabling them to personalise services for customers. By using the data cloud, companies have a consolidated governed location for all types of data (for example, clickstream, transactional, and third-party) that can ingest data from new sources, such as IoT devices. This enables organisations to gain a 360-degree view of customer behaviours and preferences from multiple inputs.

A full customer view is fundamental for a successful personalisation strategy as it enables organisations to pinpoint high-value customers and ensure they have a good experience at every touchpoint. When financial service institutions are using on premise data infrastructures they are not able to obtain real-time visibility into customer interactions, and this lack of visibility means they are simply unable to provide the best possible customer experience.

Digital banking platforms will eventually evolve to incorporate ML predictive models to drive even more personalised banking behaviours. This will only be achievable for organisations who successfully tap into the data cloud, as the success of ML models will require support from ever increasing volumes and access to datasets, both within and external to an organisation. The more an organisation can tap into customer personalisation, the better equipped they will be at customer retention and remaining competitive.

 

Boosting Data Visibility

To ensure fintechs can continue providing the best possible customer experiences, having an acute awareness of all data available will be key for these insights. Adopting a cloud data platform that offers the direct and secure sharing of data without the complexity, cost, and risk associated with legacy data warehouses is one such solution. With simpler, enhanced data sharing, companies can quickly and easily add new data products, and get near real-time insights across the business ecosystem on how this is operating. Offering a standalone data product to data consumers can lead to substantial revenue. For example, financial companies that collect tick-by-tick stock market data can use a cloud data platform to create a data project that they can sell to hedge funds.

A cloud data platform can also reduce the manual effort and copying that is necessary with traditional data sharing tools. Instead of physically transferring data to external consumers, companies can provide read-only access to a segment of their information to any number of data consumers via SQL. By breaking through barriers between disparate data systems, companies will find new sources of revenue and opportunity that they were not accessing previously.

 

Cross-Collaboration

The rise of digital-first banks, the increased availability of online services and the ongoing surge in mobile banking all represent the modern evolution of how customers now interact with their finances. To meet the demands of today’s customer, financial organisations will see big benefits in collaborating with other finservs through real-time access to data. For instance, if a customer is using a third party fintech to track their finances, a financial institution must share data with that fintech organisation so their customers can access their accounts.

Last year, 65% of banks and 76% of credit unions said partnerships with fintech companies will be an important part of their business strategies in 2020. These numbers represent an increase from 49% and 60%, respectively, compared to 2019, showing a clear trend towards a more open banking landscape. Financial institutions that do not take steps to improve the accessibility of its data risk losing their customers or losing them to a more agile and collaborative financial institution.

Data collaboration can also help improve instances where investment banks may otherwise have been forced to hold excess capital. This is because aligning on risk exposures and liquidity is executed through nightly correspondences instead of what could be real-time data sharing through the cloud.

With fully governed, secure data sharing, companies can also easily determine who sees what and ensure all business units and business partners access a single and secure copy of their data. Not only does this enhance efficiency, but centralising data into a single source of truth, rather than in separate locations, will boost data security.

Data is the lifeblood of the financial services industry. By migrating to and capitalising on the data cloud, companies can build a future-proofed technology stack that delivers business agility, enhanced customer experiences and data sharing capabilities. Prioritising these digital-first experiences for customers will ensure financial organisations have a competitive edge that they were not using prior to the pandemic, and continue the progress that has been made in digital transformation more broadly across the financial services industry.

 

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