Three Critical Facets For Financial Services To Succeed In The Digital Future featured image

Three Critical Facets For Financial Services To Succeed In The Digital Future

The pandemic pushed us years forward, and the notion that every modern company is a technology company has only been reinforced by rapidly transforming business practices. We are at an apex of digital transformation, and precision analytics is driving the most successful innovation initiatives across many industries. The unequivocal rise of the connected ecosystem has forced consumers to engage across digital channels, and banking and financial services evolved almost overnight.

The race to digital has always seemingly been easy, but the adoption and implementation remain an uphill climb, particularly in the financial services industry, where legacy solutions and antiquated IT infrastructure have a stranglehold on business processes. Over the last 18 months, exponential improvements in digital technology have underpinned the evolution of banking for both internal processes and customer-facing experiences.

As traditional financial institutions migrate from on-premises data centers to the cloud, questions arise around how banks are embracing transformation while still complying with tight regulations in risk management, fraud and information security. But without digital transformation, legacy institutions could lose out to their more agile competitors, like those in financial technology (fintech).

Based on my perspective, leading an analytics firm that works with the banking, financial services, and insurance (BFSI) sector, it’s critical to the future success of these organizations that they focus holistically on these three aspects:

Data Trustworthiness

Banking has always been innovative. From the pneumatic tube to the widespread use of ATMs, banks continue to lean into innovation to improve customer experience. However, the adoption of banking’s most recent endeavor — the move to the cloud — is proving to be more complicated.

As we adopt digital technologies, it is important to consider the role data plays. In fact, in this connected ecosystem, whoever owns the data owns the customer. However, simply owning data isn’t the end of the story. By the time someone in an organization looks at a piece of data, it’s been ingested, harmonized, normalized, and transformed many times over to give it context. This begs the question, “Can we trust our data? Is it valid?” And further, how does this knowledge impact our decision-making?

To ensure that data serves its intended purpose, financial services organizations must pay attention to the importance of data governance, which includes some key facets like data lineage, data quality, and the completeness of metadata. When we understand how our data has been digested, we can confidently make decisions without missing the whole picture.

For financial institutions, data governance is probably one of the most important constituents tending to risk management, credit decision-making, fraud detection, and regulatory compliance. It’s also important for the real-time nature of data in financial services, which eventually should help drive better services for their customers.

Harnessing The Power Of Data

Once we’ve determined the journey and quality of data, we can begin to leverage it and take analytics from insight to action to create a strategy that bolsters company growth. For banks and financial service organizations, there are opportunities to utilize artificial intelligence and machine learning technologies — built on the foundation of data — to help increase deposits, reduce fraud, and address risk and financial crime.

For example, every bank and credit card company works to detect and stop suspicious account activity so that they don’t suffer fraud losses and inconvenience customers. On the flip side, overcorrecting and blocking everyday charges claiming fraud can frustrate customers and ultimately lead to increased churn. This is where deep learning and advanced analytics can refine the fraud models already in place to ensure better stress testing with significantly higher accuracy for improved customer experience.

The capabilities of data-backed technologies are far-reaching in a world where data sets are huge and diverse, generating immense data volume for high-end analytics.

The Rise Of The Experience Economy

The primary goal of digital transformation is to improve customer experience and, in turn, aid toward a stable society. In a connected digital ecosystem, customers expect that all digital tools work in tandem and provide a seamless experience no matter the channel or platform.

The recent adoption of open banking represents a significant shift in the industry — one that I believe is likely to continue to grow as customers learn its benefits, from fast and secure payments to more reliable account aggregation. Moving forward, customer retention will likely depend on the quality of the experience the organization can offer. It is critical for executive teams to ask themselves how they can make banking experiences seamlessly integrated into their customers’ diurnal routines.

The way I see it, banks and financial institutions have and will continue to remain at the forefront of innovation, especially as they immerse data and analytics into the core of their decision-making.

Transformation does not stop when the switch to digital is complete. Position yourself for success by deeply understanding your organization’s relationship with data and leveraging it to inform future innovation, as conviction and convenience never live on the same block.

Author: Parijat Banerjee

Parijat Banerjee is Global Business Head for the Banking, Financial Services, and Insurance (BFSI) sector at LatentView Analytics.

Source: Forbes