Getting trusted data. That simple but often elusive goal sums up the focus of financial services today. Piling investments in digital platforms, global financial service organizations of all sizes seek to leverage data technology as a strategic business asset. The primary goal? Managing quality, trustworthy data. Why? Simply put, the quality of data itself is fundamental to key processes that undermine the success or accelerate the growth of companies.
Let’s explore four top challenges facing the financial industry and how Master Data Management (MDM) provides the right momentum to address them head-on.
Maintaining regulatory compliance is certainly a major ongoing concern for financial services organizations. According to the Benchmarking the Accounting & Finance Function survey, 98 percent of the U.S. financial executives who participated “believe their regulatory compliance burden will either increase or, at a minimum, stay the same in the near future.” This area requires particular attention, not only because of the complex, constantly evolving nature, but also because it can have significant financial ramifications.
Banks of all sizes struggle when it comes to capturing, mastering and delivering data for compliance reporting. Since there’s an enormous emphasis on sending timely and accurate reports to the government, data governance has become one of the main focus areas. However, the maturity and effectiveness of reporting fluctuate due to various factors: lack of proper tools, stewardship of data quality issues and differing business definitions across different lines of businesses. Unfortunately, most banks are not equipped to meet the expectations of today’s stringent regulatory environment in a sustainable or automated way.
MDM allows companies to manage business-critical data holistically, providing comprehensive views of counterparty relationships. By integrating metadata, business glossaries and MDM, organizations can define clear policies and rules for who changes what data and when. It helps organizations bring customers, products and services into one place for a trusted, consistent source. Ultimately, they can confidently adhere to regulations such as Dodd-Frank, Basel III, BCBS 239, OFAC and AML.
A few months ago, I had an interesting conversation with an executive of a large European financial institution, who shared his vision with me:
We want the ability to wish our customers ‘Happy Birthday’ on their special day. Are they using any of our services on their birthday, such as an ATM machine, our mobile app or did they visit a branch? We want to have that data and more data available about them and their relationship with us to enhance their customer experience.
This is a notable shift in thinking, especially for an industry that has traditionally focused more on internal process improvement and reporting. In fact, the majority of banks embrace this digital transformation trend to deliver a consistent experience to customers across all channels. They want to understand their customers at an intimate level and stop treating them merely as a transaction. Clearly, this personalized transformation is fueling their success.
Having a holistic view of customers, their relationships and the lifetime value allows banks to provide personalized service and turn them into positive advocates for their brand. However, the key obstacle to this transformation is the fragmented IT environment. MDM enables them to transition to a customer-centric model, so they can focus on providing consistent customer experience across all channels and improve how customers interact and transact with the business.
Mergers and acquisitions are going to be the norm in 2016 and beyond as banks and insurance companies look to expand their market share. As discussed in my recent blog post covering my 2016 predictions, MDM allows companies to expedite post-merger and acquisition activities. It accelerates the expected value from these events for shareholders, employees and customers by creating a 360-degree view of customers and products across both companies.
Achieving the complete view of customers across merged companies is critical to ensure ongoing sales, marketing and customer service efforts. These activities also expose huge cross-sell opportunities. Having an MDM system helps determine unique customers across companies quickly, so the M&A synergies are realized faster.
IT leaders in the financial industry want to avoid the cost of maintenance of legacy systems that have been around for decades. These systems have not only created business silos, but have also created layers of redundancy across the enterprise. Any changes to these systems are expensive and extremely time-consuming. CIOs are forced to put most of their focus on simplifying the hardware and software ecosystem.
Providing the required digital sophistication and momentum to ensure data quality, MDM moves business-critical data to a next-generation platform that can adapt to hyper-dynamic business environments. It helps banks retire and decommission legacy systems, allowing IT to eliminate operational costs associated with supporting old outdated systems. Moreover, MDM simplifies how IT operates overall; reduces and eliminates redundancies; and automates labor-intensive processes, freeing up resources to innovate, rather than just keeping the lights on.
The financial services industry is ripe for big digital disruption. MDM helps create trusted data required for every business process. It serves as a platform that helps organizations reduce regulatory audit costs and fines caused by invalid data; improve time-to-market of new products and services to increase wallet share; speed up mergers; and allow IT to do more with a lower cost of ownership.
To learn more, join me at MDM 360 Summit New York on February 24, 2016. We have a number of financial organizations sharing their experiences and successes with MDM.