Chris Royles, Field CTO EMEA at Cloudera
1. Why has data become such an invaluable asset to Financial Services, and how is it changing the way they operate and gain a competitive edge?
Financial services organisations collect huge volumes of data, whether it relates to customers, financial markets or the business itself. With this abundance of data at their fingertips, those organisations that are able to harness its power can drive smarter decision-making.
Take credit scoring as an example. Traditionally, scoring models relied on narrow and limited financial data, making it difficult for individuals without well-established credit histories to access loans and other financial products. But financial institutions can now take advantage of additional data sources to assess risk more accurately. Mobile phone bills, utility payments and even social media activity can help lenders to assess creditworthiness beyond a credit history. As a result, more people can access loans, and financial institutions can address a new segment of customers that may have been considered high-risk previously.
Data can also lay the foundation for long-term customer loyalty and satisfaction in financial services. By analysing customer behaviour and preferences, financial institutions can offer personalised loan options, tailored investment advice and more relevant financial products – strengthening customer relationships and improving retention.
2. What are the best practices for Financial Services organisations to balance data-driven innovation with customer privacy, regulatory compliance and resilience?
With financial services being such a highly regulated and competitive industry, the ability to innovate in a secure manner is vital to success. Hybrid cloud models, whereby some data is kept in the cloud and some on-premise, are now the de facto best practice, helping organisations to find this critical balance. Highly sensitive data – such as customer bank details – must be tightly controlled, with strict governance imposed, but other data sets may be better suited to cloud. A hybrid strategy enables this flexibility by combining the sovereignty and security over data that you get from on-premises environments with scalability and dynamism of public cloud.
But hybrid cloud models come with their own set of challenges, and can add more stress to an already complex environment if they’re not supported by a unified data platform. These platforms enable seamless movement of data and applications between on-premises and public cloud infrastructure, which is essential for driving both innovation and compliance.
3. What impact will the DORA regulations have on the data infrastructure and operational resilience of financial institutions, and how can they prepare for this shift?
DORA brings in strict data security standards, robust encryption and access controls designed to help organisations build resilience in the face of cyber threats and operational disruption. The good news for financial institutions – which are already subject to stringent regulations – many of the DORA demands overlap with existing rules and regulations, making compliance more straightforward for the sector. Those organisations and third parties that are facing this level of regulation for the first time will find it more challenging.
As the practical challenges of DORA become more overt, we’ll start to understand the real impact it will have on financial entities. Once again, hybrid cloud architectures have emerged as a crucial strategy for financial institutions to navigate DORA while maintaining innovation and operational efficiency. The flexibility, scalability and security of customer and business data, has futureproofed organisations against DORA and other regulations, helping them to adapt rapidly to changes while optimising costs and ensuring business continuity.
4. In a fast-paced financial landscape, how can real-time analytics and AI empower organisations to respond to market changes, enhance risk management, and unlock growth opportunities?
Real-time analytics is becoming an essential tool to keep financial services organisations competitive in a fast-paced and highly innovative industry. Events such as fluctuating interest rates or geopolitical events impact financial markets in real time, so having the ability to react to changes rapidly is crucial. With real-time analytics, organisations can analyse events as they occur and make informed decisions to mitigate risk as incidents occur.
From a compliance and customer safety perspective, real-time data analytics also plays a crucial role in helping financial services to identify unusual patterns and transactions that may indicate fraudulent activity or money laundering. Transaction data, spending behaviours, personal preferences and market trends not only ensures compliance but also protects customers.
With AI, financial services organisations are now able to enhance risk management and drive growth with digital twins. By using AI to generate high-quality simulations modelled against market conditions, organisations can choose from a variety of responses. This enables them to build robust risk models for monitoring and analysing anything from credit card risk to large-scale economic disaster scenarios.
AI-powered chatbots – fuelled by large volumes of data – can further enhance customer engagement by providing real-time, 24/7 support and bespoke guidance, improving satisfaction and retention amongst customers. Firms can layer customer data with AI to build more accurate profiles and automate proactive outreach around highly personalised loan offers, investment opportunities and financial products. This is crucial to unlocking growth in financial services.