Bill Atkinson, Business Development Director at TrueCue
Digital transformation initiatives have been undertaken across the Financial Services (FS) industry for some time now[1]. From multi-national retail banking and insurance through to venture capital and private equity funds, the FS community is readily embracing new ways of working with a greater reliance on leveraging the latest technological innovations, including cloud computing, Artificial Intelligence (AI) and automation. The use of data and analytics is no different.
Data and analytics transformation, done correctly and in accordance with the needs of the business and its customers, can be used to identify huge potential cost savings, while simultaneously improving the customer experience. This in turn can help accelerate growth at a critical time. While many organisations within the FS sector are becoming digitally proficient, there are some businesses – notably within sub-sectors – which still face very specific challenges hindering their digital aspirations. Let’s consider the private equity (PE) market for example.
One of the biggest challenges for the PE sector is its ability to balance strategic technological investment with successful talent acquisition and relevant data analytics skills training. As stated in EY’s 2020 Global Private Equity Survey[2], “private equity CFOs increasingly recognise they need to elevate the overall pool of talent within the firm, particularly as data analytics takes on a more important role in the organisation”.
As ‘56% of private equity COOs, CFOs and financial executives are either using, or expecting to use ‘next-generation data and analytical tools to support the investment process’, it is clear this is an area that will continue to be prioritised for 2021.
The true value of data in the new digital world
Data, in this digital revolution has become widely accepted as one of the most valuable resources to determine the success of a business’s digital aspirations. Unfortunately, many FS organisations are struggling to balance the exponential increase in the data they are now generating with the burden of regulatory compliance
Directive 2011/61/EU and the Capital Requirements Directives (CRD). For those in the private banking sector, for example, a centralised data strategy can provide business value across many areas, from improving client relationships and supporting wiser investment decisions to ensuring effective processes to combat money laundering and financial crime.
For a larger organisation, safely storing, managing, accessing and analysing the large volumes of data that are being produced, while adhering to the latest GDPR requirements can be extremely time consuming and expensive without the right technologies and processes in place.
The barriers to extracting value from data
Converting data into actionable insights will prove to be a difficult task without the right tools and talent in place, and many within FS struggle to find individuals with the analytical, technical and business skills that are a prerequisite for success. To address this issue, greater collaboration between the C-suite (especially the CIO, CDO and CFOs), HR and data and analytics consultants will be required to forge new pathways into effective long-term training programmes.
Another challenge is the issue of data separation. FS, especially multinational banks, are complex organisations that often go through multiple mergers and acquisitions over the years. This can have a detrimental impact on communications between departments and create new challenges for individuals finding and acting on the truth within a business. Outdated processes and siloed departments, much like legacy systems, severely hinder the progress of analytics maturity and prevent digital transformation from achieving its full potential.
Innovations are increasing competition and creating new markets
As mentioned previously, AI is being readily adopted by FS, with those in the private banking sector hoping to leverage big data so they can build stronger relationships with their High Net Worth Individual (HNWI) clients and compete with agile new FinTech start-ups. Combining the latest technology with data analytics is helping organisations to react to market instability, unexpected events and disruptions (both external and internal) as quickly as possible. This is creating many benefits for organisations and customers.
The rise of digitally mature, agile and disruptive challenger banks alongside emerging cryptocurrencies and peer-to-peer lending services is putting additional pressure on traditional FS organisations to leverage new technology and remain competitive. Retail banks and insurance providers are responding by making better use of customers data to develop highly targeted omnichannel marketing campaigns, enhance the service experience and reduce customer churn. We are also seeing multinational organisations with an internationally dispersed workforce increasingly turning to ‘peoples analytics’ for HR processes and to improve collaboration in the post-Covid world.
Those responsible for managing high value hedge funds and investing in the PE sector, for example, are adopting both analytics and data consultancy services to assist with everything from basic portfolio reporting, tracking and asset allocation through to risk and returns processes, using optimised value creation and benchmarking capabilities. To support this, firms now have access to powerful cloud hosted data solutions in the form of SaaS and PaaS which can quickly compute large datasets and visualise key indicators. These are cost-effective data analysis tools that enable them to make faster, smarter and more profitable investment decisions.
A standardised data strategy creates a confident culture
With demand for fast and accurate information higher than ever, a strategy that effectively collects, integrates and manages data, so that it can be acted on effectively is the best way any FS organisation can stay ahead. Nurturing a confident culture of data professionals should be prioritised, as leveraging the information a business already owns can reveal valuable insights that make a significant difference. However, it takes more than simply investing in an analytics platform.
Organisations that invest in the right technologies, alongside building a team of data literate employees will be best positioned to reap the rewards of their digital transformation initiatives. Ideally, this should be overseen by a CIO or CDO who is equipped with the skills, experience and passion to develop and implement a standardised strategy that is clearly communicated and understood by all staff. As a result, we are now seeing increased support from the board in driving this strategy forward.
Although the current economic landscape is uncertain and it is difficult for anyone to predict exactly what the future holds, we do not need a crystal ball to know that an effective data analytics strategy will provide a welcome light in the darkness for FS businesses operating in 2021. Having the right people using the best tools will help business leaders to chart the safest route and navigate any stormy weather so they can reach their final destination as quickly as possible.
