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What is data governance and why is it increasingly important for financial services?

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Jay Reilly, SVP, EMEA at Precisely

Like many industries, the financial services sector has undergone significant development in recent years and continues to grow. In fact, according to research from Zippia1, the global industry is expected to be worth more than 28 trillion dollars by 2025. Financial institutions have also undergone significant digital transformations often promising to improve efficiency while enhancing the customer experience. An example of this can be seen with the shift to online banking, which, according to Finder2, around 93 percent of UK adults use in 2022.

Data governance in a nutshell

To keep up with the rapid change, it is becoming an imperative for financial services organisations to fuel business intelligence reporting with data that is accurate, consistent and contextual – data with integrity. However, while many organisations recognise both the benefits of effective data management, and the risks that come with hosting a vast amount of data, they do not always have an effective strategy in place. Data governance is a key factor in how organisations achieve data integrity.

The overall goal of data governance is to transform data into an enterprise asset, by aligning the people, processes, and technology needed to better understand it. It delivers visibility and understanding of data, and strengthens accountability for data assets, while enabling organisations to unlock analytical insights. Essentially, implementing a data governance programme can improve all policies and standards with regards to managing data, which ensures information is discoverable, trusted, and understood, while still being safe and accessible.

With privacy laws such as general data protection regulation (GDPR) in place, maintaining regulatory compliance remains a top priority for many organisations. Data governance can address this by helping companies track consent receipts, appropriate usage, and data subject rights requests. In addition, it ensures personal data location complies with data privacy laws throughout different countries.

Jay Reilly

Identifying business goals

One way to ensure a data governance programme is successful, is by establishing meaningful business goals ahead of time. A data governance initiative can support objectives by identifying key stakeholders and expected outcomes, while also measuring success with clear metrics. This enables companies to map data to the success factors, which align with the desired outcomes.

Some financial institutions, such as banks, often aim to improve the personalisation of products and services, to better fit the unique needs of each customer. Undoubtedly, there is an abundance of personal data within these establishments, such as card transactions, online bill payment records, and purchasing data which can provide information about internet browsing habits.

Once a business goal has been established, it is important for organisations to link data elements. For example, to improve personalisation, data governance goals need to be driven by a comprehensive and trustworthy view of each customer, which is available to everyone across the organisation. This requires giving employees access to a data catalogue, as well as clear data quality rules with approval workflows, and a view of data lineage for customer data.

A business-wide initiative

As well as establishing business goals, organisations should ensure the data governance initiative bridges the gap between business and IT metrics, across all levels of the organisation. Generally, this can be broken down into three tiers of personnel; the first is strategic personnel, who are responsible for visionary transformation at an executive level. Then, there is operational personnel, who oversee organisational execution and growth, and lastly, tactical personnel, who deal with data engineering, data migrations, and analytics.

Each level will approach the success of the organisation from unique perspectives. For example, C-suite executives will assess metrics which map overall return on investment (ROI) and business impact. This will include factors such as strategic goals around process enablement, customer sentiment, and financial results. Operational personnel will typically look for performance improvements related to response times and data quality, and those at the tactical level will focus more on granular metrics around data movement, performance, and effectiveness in cataloguing data for informed discovery.

Deploy data governance to solve problems and drive value

To achieve positive business outcomes on a strategic level, a data governance programme should solve immediate problems, while also addressing potential opportunities which add value to the business. For example, regarding the personalisation goal, data governance can immediately solve the centralised collection of customer data for sales and marketing teams. The ongoing opportunity it can address could be data profiling which adds depth and context to said customer data.

Another example is with financial organisations being responsible for managing investments and income, it is essential that businesses can make confident decisions based on data they can trust. Data governance is an important factor of a data integrity strategy, providing a comprehensive view of administrative, operational, legal and compliance expertise, as well as institutional, customer, banking, accounting, and portfolio information.

According to research from ReportLinker3, the global data governance market is expected to be worth more than three billion dollars in 2022 and grow to more than seven billion by 2026. Showing that business leaders around the world are recognising the significant impact data has on organisational growth. Going forwards, enterprises will need to lay down a solid foundation for data integrity, with data governance a key factor in driving meaningful business value.

 

Finance

Crypto’s tipping point

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Chris George, Senior VP of Product at Somo argues that Crypto needs to improve its scalability to be taken seriously

Cryptocurrencies are no longer the exclusive domain of high risk financiers or tech Bitcoin jockeys, willing to ride a niche and volatile asset for good or ill. Today, neobank and mainstream banking apps alike offer crypto banking, helping them trade in Bitcoin or Ethereum from as little as one dollar(https://www.revolut.com/crypto/).

Indeed, in September 2022, Finbold reported that British citizens had invested nearly £32bn in cryptocurrencies, and additional research from HMRC would have it that one in 10 UK adults has bought crypto, double the number from the previous year. 

But even given the legitimacy lent to crypto by the fact that now 50% of UK banks allow customers to interact with these currencies as well as other digital assets, how can the asset management industry turn it into a significant – and mainstream – asset, particularly in today’s turbulent economic climate? With the collapse of FTX, this must be taken into serious consideration. FTX was sold as being a safe and stable way to trade digital currency, alas this has not been the case. It turns out Sam Bankman-Fried seriously over-promised and dramatically under-delivered, gambling away customer assets and ultimately prioritising fraud and malpractice.

First, we need to acknowledge that not all crypto is created equal. Some, such as Bitcoin or Ethereum, do function as a currency, are limited in volume and therefore can increase and (as 2022 amply showed) decrease in value. But other blockchain-based crypto doesn’t behave like what most people commonly accept as currency at all. 

For there to be significant uptake in crypto as an asset, there is going to have to be a far broader and deeper understanding of what it is and what it can do. As Christophe Diserens, chief compliance officer at SwissBorg has suggested: “Value and useability are going to be key. Metcalfe’s Law has been used to value tech and internet stocks so why not crypto?”. That value took a bit of a beating during the recent sell-off and crypto’s perceived volatility will need to be addressed if it is to achieve scale. Because that’s what it’s going to need if it’s ever going to be considered as a legitimate global payment alternative in the future.

 

The role of The Merge

Not the latest B-movie, sci-fi flick, The Merge in September 2022 saw the world’s second-biggest cryptocurrency, Ethereum, move from a ‘proof of work’ to a ‘proof of stake’ protocol. This was nothing short of seismic. 

Proof of work is how the vast majority of crypto has been mined to date. People solving complex equations to validate transactions (the ‘work’) uses masses of computer processing energy, accounting for a significant slice of the world’s electricity consumption. In today’s climate (in both senses of the word), that’s just not on. 

Proof of stake, on the other hand, relies on far fewer ‘miners’, fewer computers and less energy as a result. This so-called ‘Merge’ is not only expected to reduce worldwide energy consumption by 0.2%, but also boost the crypto economy as a whole, creating more opportunities for investors and allow developers to build more products and applications on Ethereum. Ultimately, it could be what drives the decentralised internet of blockchain, crypto and NFT – Web3 – mainstream. 

What does this mean in the ‘real’ world? This could present a real opportunity for the financial services sector as a whole. It will change the way it operates, speeding up transactions, creating new business models and generally just making the whole thing a more efficient way of working. Fully cashless payments for business would be a real boon, given the costs and potential losses involved in transacting in cash. Digitisation also makes transacting an altogether more intuitive experience. 

One thing crypto and its associated technologies and solutions needs to be wary of is becoming a solution in search of a problem. For a truly mainstream breakthrough, the industry needs to make sure it’s bringing the consumer along on the journey. For end users to be truly confident in crypto, it has to benefit from the same levels of governance and regulation that cover the rest of the financial services industry, building and maintaining consumer confidence will be extremely important as trust levels have been shaken by the recent lack of solid administration and “irresponsible lending practices” leading to the FTX implosion . It has to be simple to transact, but with all the protections that investors have come to expect. It can’t afford to take them on another rollercoaster ride like 2022’s. 

While 50% of the UK’s banks may be getting on board with crypto to some degree, there is still a wide open ocean of opportunity for asset management players to realise value for themselves and their clients. It will involve some reshaping and more investment in digitisation to manage the assets of the future, whatever they may be. 

Somo, part of the CI&T family, will be publishing a report titled ‘Assessing the Crypto Conundrum: Will cryptocurrency ever be a significant trading asset and how can digitalisation shape its future?’ in 2023. 

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Skedadle to change the game for advertising with Currencycloud partnership

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Currencycloud, the experts simplifying business in a multi-currency world, has partnered with Scottish start-up app Skedadle to provide its users an easy, secure and seamless way to transfer money earned in-app while playing games on public transport.

Skedadle rewards travellers for the time they spend playing on-the-go. They can earn £2 per day simply for playing games on the move. That’s an extra £60 in their pocket each month. This can be done thanks to a disruption in the advertising market, by using algorithms to verify and track the users’ engagement with ads, proven to be higher while playing than in traditional online advertising, which increases product and brand recall for advertisers. Thanks to the partnership with Currencycloud, Skedadle users can use the app on public transport and be reassured that all financial transactions and financial data comply with the highest standards of security and validations.

By connecting to Currencycloud’s API technology, Skedadle has been able to integrate in their app a state-of-the-art payments ecosystem that seamlessly bulk settles the money earned from advertisers into a secure account and then processes withdrawals from users fast. At the same time, Currencycloud also sets the infrastructure that will enable them to grow both geographically in the UK and globally, by providing access to 38 currencies and low cost, fast FX rates.

Says Nick Macandrew, CEO and Founder at Skedadle: “Trust and security are crucial, especially when it comes to people’s money. As we rapidly grow our platform, we need a solution that can keep up with our pace and Currencycloud do just that. Our cutting-edge technology requires a secure, stable, and simple way of managing payments, whilst guaranteeing the best user experience possible.”

Nick Cheetham, Chief Revenue Officer at Currencycloud commented: “Backing bold start-ups from day one has always been part of our DNA. Skedadle’s creation of new revenue streams for travellers and advertisers alike is an exciting business endeavour. We are eager to see how the  platform can grow and disrupt the market by integrating our seamless payment capabilities.”

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