By Tim FitzGerald, EMEA Financial Services Sales Manager, InterSystems
Often perceived as more agile and innovative than traditional banking institutions, fintechs have grown rapidly by offering new services and high levels of personalisation. Such is the fintechs’ sophistication and quality of customer experience, the incumbent financial institutions can see how they must emulate them or seek their collaboration. As far back as 2017, 82% of global financial services firms said they expected to increase fintech partnerships, with 88% concerned they would lose revenue to innovators.
Established banks have become sophisticated in their use of data to create new services and customer-facing phone-based applications, for example. Yet they sometimes struggle when it comes to the innovation and deep levels of personalisation that increase revenues from existing customers and attract new ones. Institutions with a long heritage have masses of customer data but it is often in highly disparate systems built up over time and difficult to bring together. This is where the fintechs sometimes have specialist expertise. They know how to use all kinds of data to provide the slick interfaces, and highly personalised and innovative products and services that customers want.
If they are to match the creativity and agility of fintechs, large financial organizations need to enable their business teams to extract more meaningful insights from the masses of data in their grasp. They can only do that if they have the technology to break down their internal silos, improve data quality and provide quick access to analytical insights.
Research shows the data challenges facing incumbent financial organizations
InterSystems-sponsored research by FIMA in the US and Canada reveals why so many financial organisations find breaking down these siloes so difficult. FIMA asked 250 financial leaders from retail and investment banks, insurance and wealth management companies how they make actionable insights available to their business teams.
More than half of all respondents (54%) said siloed data was one of the biggest barriers to innovation in their business. Nearly seven-in-ten (68%) said creating a single and consistent representation of data by removing the silos was a challenge. But culture and conservatism also have an effect. Almost half (49%) said there was a lack of understanding or buy-in more widely within their organisation, illustrating the difference in mindset between larger, multi-faceted financial institutions and newer, smaller organisations with fewer lines of business.
It’s not surprising that bringing the data together meaningfully is such a challenge for banks. Large financial institutions have many different interactions with their customers, ranging from business and current accounts to mortgages, loans, insurance and investments. It is often difficult to obtain a 360-degreee view of each customer, their requirements and patterns of behavior when data is in different formats and systems.
To deliver high-quality customer experiences, financial institutions must be capable of collating and analysing all this data in near-real time. Only then can they produce the insights that meet the heightened fulfilment and expectations of customers and clients used to the customer experience of online retailers.
In other words, financial organsations need a holistic view of their clients, whether institutional, business or consumer, so they deliver more effectively. Their business teams need fast access to the critical insights for the creation and execution of more effective customer strategies.
Institutions can achieve this by using a more innovative architecture, such as the smart data fabric. This helps democratise insights by providing accurate visibility across the entire business. Smart data fabrics connect data inside and outside the organization, ensuring it is accurate and current, incorporating real-time event and transactional data with historical information and inline analytics capabilities.
Recognition of the need for new priority-setting in data management
What is encouraging from the FIMA research is that significantly more than half of all organizations recognise they must democratise the use of data internally. More than six-in-ten respondents (62%) said improving access to siloed data was at or near the top of their list of priorities for the next 12 months. Employing data in strategic decision-making is also a top-three priority for many.
One statistic helps explain why democratisation of data is a priority – in nearly nine-in-ten organisations surveyed (85%), IT employees have to spend between a quarter and half their time helping their colleagues find the data they want and then extract the insights from it. This is a substantial amount of time (and cost) that the smart data fabric can address. By embedding analytics capabilities, including data exploration, business intelligence, natural language processing, and machine learning, the smart fabric makes it faster and easier for line-of-business managers to gain new insights on which to build new services and deliver an entirely new level of personalisation.
Integrating fintech applications
The research also highlighted how organisations now realise they currently lack the technology to achieve their goal of becoming a data-driven business. More than half of them (55%) plan to implement new data management solutions.
Integrated data management solutions will certainly help establish standards for data governance across the organisation and help remove the internal barriers to the flow of data. But in the face of fintech innovation, what institutions also need is the ability to integrate cloud-native fintech solutions to work seamlessly with their own applications and data sources. The banks must be fully capable of incorporating these fintech applications into their production environments to help them innovate faster on a wider range of business initiatives.
Some organisations still undertake such integration manually, coding point-to-point between solutions, which is costly and time-consuming. It is also error-prone and difficult to extend. A real-time bi-directional gateway solution will enable them to overcome these obstacles and difficulties, connecting and integrating cloud-native fintech applications and data stores much faster, with a much simpler architecture than would otherwise be possible. It provides real-time, bi-directional, consistent and secure data-sharing between the fintech application and the incumbent’s production applications, wherever the production data may be.
This is one of the increasing number of ways that banks and institutions can employ more advanced smart data management technologies to overcome the challenges they face when seeking greater innovation, efficiency and new levels of personalization and ease-of-use for customers.
The 360-degree view of data is a necessity
The FIMA research has shown the scale of the challenge and pointed to an appetite for change and new approaches. By implementing a holistic, 360-degree view of all their data and embedding analytics in a seamless fabric, established institutions that sense they must innovate, will move quickly towards these goals. They will increase their time-to-value, acquire far greater organizational creativity and agility and introduce significant new efficiencies.
This will enable them to compete and collaborate with fintechs in a more competitive world where the ability to manage and analyse data and share insights rapidly, will be critical.
