Banking on value: Financial institutions deserve more from their data

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Banking on value: Financial institutions deserve more from their data

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This content is contributed or sourced from third parties but has been subject to Finextra editorial review.

In 2006, Clive Humby famously declared that “data is the new oil”. The eye-catching quote perfectly surmised the immense potential value of data as it was understood at the time. Since then, that potential has only grown, particularly within the realm of financial services. For many banks and financial institutions, data has become a cornerstone for creating value in recent times. However, some in the field have struggled to keep up with this change.

Some financial organisations were quick to recognise and capitalise on the immense potential of data, using it to transform their operations. Others, however, have not evolved, clinging to antiquated ways of handling data. To this end, just as crude oil must be refined to be useful, raw data's value is only unlocked through sophisticated processing, enhancing everything from customer experience to operational efficiency.

Capitalising on data

Those who fall into this latter category must look for ways to evolve. With the right data management approach, financial institutions can revolutionise services such as international transactions, fraud detection, and anti-money laundering efforts. Unfortunately, this potential revolution often feels daunting to banks, who are often wary of the changes it entails and who feel uncertain about how to begin making improvements.

It's this reticence that has probably influenced the banking industry’s comparatively slow embrace of the potential of data. Despite some advancements, companies in this field have largely been overshadowed by fintechs and neobanks who have harnessed data to greater effect. By contrast, traditional banks and financial institutions have hesitated, reluctant to venture beyond familiar territory, but the tide is turning.

Embracing the data evolution

The surge in customer satisfaction with data-driven services and the rise of fintech and neobanks have demonstrated a missed opportunity for traditional banks. As we approach the end of 2023 it’s clear banks can no longer afford to deprioritise effective data management systems. If they want to preserve their position at the top of the financial ecosystem they must begin to respond.

Compounding this need is the ever-evolving demands placed on these businesses by regulators. In recent times, rules around data management have become a lot more stringent, with banks increasingly asked to disclose new forms of financial information outside of just transaction data. In turn, the way banks need to report on transactions and other forms of financial data has become a lot more complex.

Streamlining data management

Banks need to bring order to their data management to stay competitive. By implementing systems that trace, monitor, and understand transactions, banks can transform data into actionable insights for operational excellence, compliance, and auditing, while also offering more personalised customer services. With these enhanced capabilities, banks can generate more value and deliver a higher standard of service to customers.

Breaking down organisational silos is essential in this pursuit as it can help to provide a holistic view of vast data sets. Real-time access to transaction data can enable advanced search capabilities, reporting, and dashboard functionalities, simplifying the discovery of crucial information amidst vast datasets. Therefore, to ensure they’re making data count, banks need data management systems capable of this.

Transitioning to advanced data management

Modern data management systems must track transactions throughout their lifecycle for real-time updates, increasing visibility and control over operations, and identifying operational bottlenecks swiftly. These systems also play a crucial role in early fraud detection, providing immediate alerts to potentially suspicious activities, thus enabling prompt preventive actions.

In addition, banks should seek configurable and automatable systems to minimise the need for manual oversight. Data management at this level used to be a challenging endeavour. However, advancements in technology have made it more accessible. Now, it’s time for banks to ensure they’re prioritising systems of this nature, and adopting systems that can reduce transaction friction and offer real-time, efficient, and contextual data insights.

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Contributed

This content is contributed or sourced from third parties but has been subject to Finextra editorial review.