“Data is the new oil.” This has been said and heard in various venues over the past few years. But what does it mean?
It means that data is the product with which banks and other institutions will be able to fuel their business for the foreseeable future. This includes both structured data (transactional, organized data that is easily interpreted by computers and systems, such as loan application information, or customer account profile information) and unstructured (i.e. big) data (random, real-life data, such as information gained from social media, photographs, video, etc.).
As information on customers is harvested, analyzed, and used in decision making, those institutions that can utilize this information in the most effective way will win the digital war. Overused examples or not, Netflix and Amazon are the paragons for how information regarding customer preferences – both from the perspective of an outstanding interface/interaction experience (think Digital), combined with relevant content (think Data) – can catapult an organization into the market leader category. The digital engine that has driven their success is fueled by relevant, rich and timely data.
However, the vast majority of institutions, particularly financial organizations such as banks, have yet to determine the following:
Yet, we know that data – rightly understood and rightly used – has the power to transform how an organization does business.
In addition, the concept of “Open Banking”, which, simply defined, is the ability for a customer to allow access to their financial data for purposes of having access to a broader array of services and make the most of their money, is headed to the U.S. The impact of this requirement is that banks provide access to third-party application providers and other institutions to a customer’s financial data for the purpose of writing applications to utilize that data.
While the full impact of Open Banking is yet to be known, what appears certain is that banks and other financial organizations will be required to provide open access to consumer data. Open APIs ensure more seamless data flows between banks and financial technology companies and can open up greater insights and efficiencies for customers — small-business owners, in particular.
For example, when small business owners are able to connect their accounting platform to their bank of choice, they’re able to manage their reconciliation activities far more easily, because they don’t have to do manual imports, encouraging them to keep their books up-to-date. Real-time connectivity to trusted data makes it easier for accountants to continuously certify data and ensure high-integrity accounting. All that data has the potential to be available for banks and lenders, giving them an unprecedented view of a small businesses’ finances. This facilitates a better lending decision, making sure the small business is getting the right product or credit at the right time.
While banks perceive this as a threat, it could be viewed as an opportunity, as the ability to obtain an entire picture of a customer’s financial picture provides opportunities to make offerings that are more relevant than ever to a customer.
From a sample “Use Case” perspective, managing data at a truly enterprise level means the ability to:
Managing data at a truly enterprise level also has the following Customer Benefits, as they can experience:
For an institution looking to take advantage of the power of data, the outward-facing perspective shows that the amount of data being tracked in the world is increasing 10-fold year over year. This increase – which is largely unstructured data – requires large amounts of computing power and AI capabilities in order to make sense of the information. Considering that banks and financial institutions typically struggle with effectively managing their structured (i.e. customer and transactional) data due to both infrastructure and people challenges, adding vast quantities of unstructured data significantly exponentiates the issue.
On the other hand, the inward-facing perspective illustrates the following challenges, particularly for U.S. banks:
In order for banks and other U.S. institutions to effectively manage both structured and unstructured data for competitive advantage, banks and other financial institutions need to address data governance and management, infrastructure, tools and processes, and resources.
Data Governance and Management: Solid Data Governance and Management would ensure that an institution:
Infrastructure: Ideally, a bank would have access to a single platform solution that could perform all necessary functions in relation to data, both structured and unstructured – including collection, storage, secure transmission/ monitoring, analysis, interpretation and reporting. This solution would also provide oversight of the service to ensure efficiency and effectiveness.
Tools and Processes: A bank would have industry-standard analytical tools that could effectively analyze both structured and unstructured data.
Resources: This would include strong, experienced Data Scientists and other like resources.
Frankly, addressing these factors in-house is challenging at best, but the bank or financial institution can’t avoid at least one of them – Data Governance and Management.
For the other areas – Infrastructure, Tools and Processes, and Resources – if an institution can find the right solutions and partners to augment or support those areas, the benefits could be as follows:
Determining how to address the issue of transactional and unstructured (i.e. big) data is a critical one facing the financial industry today. The challenges of Data Multiplication and Replication, Data Governance, Data Architectural Strategy, Size and Capacity to Scale, and Specialized Resource Availability are common for all organizations, particularly banks and financial institutions.
While an organization can’t be certain of the future, it can take steps to ensure it stays ahead of the competition. Other industries not as traditional as banking, such as retail and entertainment, have seen the effects of the Digital Age and the power of data transform their industries – think Amazon versus Sears, or Netflix versus Blockbuster. The trends move slower in the financial industry, but they are coming. Determining the right solution with the right partners can stave this off and allow a bank or financial institution to not just survive – but thrive.
AARON SCHLENZ, Managing Director, Core 20/20 LLC
Aaron Schlenz is a creative and dynamic financial services executive who has made a career of delivering groundbreaking and transformational efforts in support of business strategy across a wide spectrum of domains, including application, governance and operations. Complimenting his expertise as a highly effective cross-functional collaborator bridging operations, business and technology, Aaron possesses a natural ability to identify customer needs and partner for results, tackle ambiguous, complex problems, and develop workable solutions. Utilizing his skills in program and project management, execution strategy, and transformation, Aaron managed the successful Zions Core Banking Transformation program, with responsibility for planning, delivery and governance. In addition to Zions, Aaron has deep financial-services transformational experience with Fannie Mae and Freddie Mac. Aaron took his skill set and leadership experience and partnered with John Kershner to create Core 20/20 LLC. Aaron received his MBA from Mount Saint Mary’s University in Maryland, and his B.S. in Accounting from Illinois State University.
JOHN KERSHNER, Managing Director, Core 20/20 LLC
John Kershner is an executive leader with proven experience developing and executing strategies that deliver bottom line results utilizing creative abilities, knowledge and skills gained as a management advisor and coach. Key areas of interest include strategic technology management, business process improvement, change management, and organizational design and development. John successfully led three large core banking transformations and many other core and non-core technology improvement and replacement initiatives. Most recently, John organized and led the program for the first U.S. implementation of the TCS BaNCS global core banking platform at Zions Bancorporation. In 2018, John partnered with Aaron Schlenz to create Core 20/20 LLC. John received his MBA from The University of Texas at Austin, and his BBA in Finance from the University of Houston.
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