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Three data issues financial institutions should be getting right

Jun 07, 2019

Gone are the days of traditional financial services products. These days, customers are looking for a lifestyle-focused offering, but that requires systems and data that are accessible, timely, accurate and reliable. Dervla McCormack explains how financial institutions need to handle their data before they can compete with the new market disruptors. 

Traditionally, financial services firms sold products and services. However, the trend now is towards providing a holistic lifestyle-focused financial services offering. Luckily for customers, this means that financial services providers are seeking to address all of their combined services requirements in one place. Combining services such as savings, loans, pensions, money transfers, hassle-free payments, access to on-demand financial information, and financial advice in one area requires systems and data that are accessible, timely, accurate and reliable.

New entrants to the financial services market are adept at managing their systems and data and, consequently, have been able to offer customers quick account set-up, easy-access, and novel new services that customers haven’t seen before. If existing financial services firms are to compete in a new digital era where customers are accustomed to accessing tailored services, data and information on-demand, then they need to ensure their systems and data are robust  enough to give them the information they need.

There are three things to get right in addressing data issues in many Irish financial institutions:

Access to data

Financial institutions tend to have more data than they might ever need. However, it is often spread across a number of systems and stored in a variety of formats. Much of the data may still be sitting in paper files. To ensure data can be accessed in a timely manner, it’s important to think about the format it’s captured in and where it’s stored so that individual requests for data, either by the business or customers, can be responded to quickly.

Accuracy of data

We all know the saying “garbage in, garbage out” and this is critical when it comes to data. As individuals’ financial standing and business decisions require reliable and accurate data, financial institutions need to be able to stand over the accuracy of the data they are holding. Where data isn’t at the level of accuracy required (it could be inaccurate, duplicated or conflicting), it’s imperative that priority be given to cleansing data. This could involve consolidating some data and deleting others.

Governance

With more and more demands on data, not only by individuals in relation to their own data (as facilitated under GDPR), but also by other financial institutions under an open banking regime, controls over access and governance need to be stronger than ever. Given the potential penalties and reputational damage, financial institutions want to avoid data breaches.

The current new entrants and disruptors in the market do not have any legacy data issues and have created “fit-for-purpose” data governance, access and availability from the start which gives them a significant advantage over traditional players. This, coupled with Open API banking under PSD2, further creates challenges for the traditional banks.

It is important that financial services institutions address their data issues rapidly, efficiently and effectively. If they can do that, the significant advantage they have over the new entrants in the market will mean that they can continue to remain relevant as an holistic lifestyle-focused financial services offering. Those who don’t will find developing new services cumbersome and risky. New distribution channels, alliances and innovative offerings run the risk of being left behind if data issues aren't addressed properly.

Dervla McCormack is the Financial Services Consulting Partner in PwC Ireland.