Globally, 62 per cent of banks expect to be digitally mature in 2020, compared with just 19 per cent in 2018. In Australia, the Consumer Data Right (CDR) is now paving the way for “open banking”, requiring major banks to grant access to their customers’ data and allow for third parties to utilise them. This highlights the need for financial service providers to ensure they start with a solid data strategy as part of their digital transformation as they look to harness new technologies – rather than treat it as an afterthought or a separate component to digital adoption, writes Paul Crighton.
Back to basics: start with good, clean data
Many banks have already embraced digital transformation, but this transformation rarely begins with good data management. Data management is the administrative process of acquiring, validating, storing, protecting and processing information to ensure the accessibility, reliability and timeliness of the data for its users. The financial services industry creates and deals in huge amounts of data, with large volumes of transactional data flooding banks on a daily basis.
Starting with good data management is key to any digital transformation journey for players in the financial services industry, because simply collecting data is not good enough. Only with a robust strategy and powerful data analytics platform in place can banks start to make sense of their raw and unstructured data, which can then be categorised and analysed for effective decision-making. Without strong data management fundamentals, open banking initiatives – which rely on well-structured access to financial providers’ data sets – and adoption of technologies like AI will only ever achieve a fraction of their potential.
Strong data must be complemented by strong infrastructure, which guarantees not only speed but security, compliance and real-time visibility of all data stored. Data management platforms run on the cloud are a good example of such robust infrastructure, providing everything from data storage, systems integration, data analysis and automated backup services anytime, anywhere. In most instances, hybrid cloud platforms will provide the best balance between security and sovereignty over sensitive workloads; and fast, cost-effective hosting for public applications and services.
Such features are especially important for finance, an industry that can be subject to data breaches and is under strict scrutiny with regulations and compliance laws like the General Data Protection Regulation (GDPR) in place to protect citizens’ personal information. Simply hosting data on hybrid cloud isn’t enough to maintain full compliance: banks and other financial services players must maintain visibility and control over where different data lives and what applications access it always. Only by taking a proactive stance in data management, and getting the fundamentals of good data governance right, can they adopt digital banking models (like open banking) or technologies (such as AI or blockchain) without putting their businesses at greater risk than they and their customers can afford.
The future of banking: open-ended possibilities
A rigorous yet flexible approach to data management will help financial service providers translate their data into new services, more personalised products, or stronger customer experiences. That will not only positively affect day-to-day operations, but transform and disrupt business models in the industry.
On a basic level, good data management principles support a range of new technologies like virtual assistants, chatbots, digital-only banks, and even the Internet of Things (IoT) connecting different devices for banking transactions and enquiries. But the future of banking extends far beyond the financial world. Banks can now leverage new technology to streamline customer experiences to provide faster approvals with less paperwork. In China, MYBank already uses data from its e-commerce’s payment arm Alipay to conduct analysis for personal and corporate loans.
New technologies like virtual reality, Artificial Intelligence (AI), predictive analysis and blockchain also all depend on the availability and accessibility of good, clean data. Open banking requires that data from banks be well-structured so that third party developers can use it to develop apps, resulting in a unique, targeted bundle of diverse digital solutions. When done right, banks and other financial services providers can establish themselves as data platforms with entire app ecosystems growing around them – and reliant on their data to thrive.
Many in the financial services industry are now coming to terms with the importance of an open data culture and the benefits it can bring to empower consumers, drive competition, boost innovation, and pave the way for new solutions. There’s no doubt that the banking of tomorrow will be fundamentally different from the banking of today. Financial institutions, therefore, should begin by investing in robust data management solutions, a key step on the digital transformation journey to serve the digitally-dependent customers and organisations of the future.
Paul Crighton is NetApp's managing director Australia/New Zealand.
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We Translate Complicated Financial Jargon Into Easy-To-Understand Information For Australians
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