The financial services industry has undergone many changes over the past few years, as digital transformation makes its way to the business operations of banks globally. Digital transformation comes in many shapes and sizes, offering a variety of services depending on what you are looking for. When it comes to the financial services industry, agile, effective operations are key for success.
As we approach the holiday season, we take a look back at the most disruptive trends that have taken the financial services industry by storm, affecting many enterprises and creating a shift in customer experiences and work culture.
Banks Adapt To The Public Cloud
Banks are adopting to the public cloud more than ever, and it is changing how customers interact with data.
“Although private clouds have dominated the past several years, in the coming year we’ll see a marked increase in large projects to test, and a hardening of hybrid cloud environments.” Mapr reports.
Although the industry is still in its early stages of adopting this tool, many of businesses are conducting strategies around it. In fact, according to Cloud Security Alliance, 61 percent of financial institutions have developed a cloud strategy within their organizations. The biggest decision that banks make when it comes to the cloud, is to use public or private cloud computing.
The difference between the two is very clear, and can affect the enterprise differently.
“A private cloud hosting solution, also known as an internal or enterprise cloud, resides on company’s internet or hosted data center where all of your data is protected behind a firewall.”
This type of cloud is most commonly used for companies to use as a existing model for the future. Companies are migrating toward public clouds more than private clouds, while some companies are migrating both.
The public cloud offers less security management, being that you are not responsible for the management of the hosting solution of the cloud. The goal for financial services is to gain an insight about what is the best path that will manage your public cloud adoption. Understanding the ins and outs about storage, computing and data,can position you to be successful while migrating this tool.
Geo-enriching Customer Profiles
The goal of any financial service company is to provide customers with satisfaction and active engagement. Banks are able to use location based data in order to understand where customers are by understanding transactions which helps locate areas of risk.
“Geo-enriching customer profiles and accounts are increasingly being used in the financial sector, where regulations designed to prevent fraud and money laundering require institutions to properly understand the links between different accounts and identify potentially fraudulent behavior.” Forbes reports.
The process of enriching involves geocoding which is the act of “deriving latitude and longitude from an address.” Geo-enrichment then holds a large role in providing a clear understanding of the data presented.
The information that geo-enrichment provides can include:
- Global streets
- Points of interest (airports, parking, recreation, transport hubs, natural features, etc.),
- Demographics, income, and purchasing power
- Risk and natural hazard information.
Knowing where your customer as opposed to just who your customer is, can provide insight to further position your business for success.
“Understanding where customers routinely shop and the types of products they routinely buy, enables the financial institution to make targeted offers that create an incentive for the consumer to shop within its network of retailers while utilizing their credit/debit card.” Pitney bowes reports.
Combating Financial Crime
So far, we have learned that location intelligence assists financial services with customer engagement. This tool also helps expose crime among customers. With the rise of digital, the fight between financial fraud and crime has become more complex. Location intelligence helps combat financial crime with the help of data and analytics.
“By combining proprietary data sets with industry benchmarks and government information, financial institutions can use artificial intelligence, machine learning, and analytics in the fight against financial fraud.” mckinsey reports.
With the combination of customer profiling, location intelligence helps identify which transactions are unusual.
Big data is exploding in banks, creating opportunities to move toward digitally centric tools that integrate CIO’s and data scientists. The tasks of these professionals involve retrieving important information in data in order to create customer-centric experiences as well as to provide banks with informative and up to date information.
As many financial professionals may know, data and analytics are the best way to gain insight in order to answers questions about customers using accurate and strategic responses. These tools position enterprises to be successful while combating customer engagement.
“Analytics is an encompassing and multidimensional field that uses mathematics, statistics, predictive modeling and machine-learning techniques to find meaningful patterns and knowledge in recorded data.” Sas reports.
For obvious reasons, analytics is extremely important in finance, mainly because customers are trusting financial service organizations with extremely sensitive and secure personal data.
“To fully leverage the value of customer data and drive profitable growth, financial institutions must bake advanced analytics into their cultural DNA. Those banks and credit unions that figure out make the right data available to the right people at the right time will have a significant competitive advantage.” The Financial Brand reports.
Financial institutions depend on managing big data in order to drive customer engagement. Transcribing data is crucial for this industry because it provides valuable information that can put banks in a position to stay ahead of the competition and target a customer.
Structured data is data that can be transcribed by both computers and humans, generated through the web and PDF platforms. This data is any form of information that is seamless and easily searchable by using search engine algorithms.
This can be understood by using:
- Data points – classified by numbers
- Dates – the date of the transaction
- Texts – includes multiple data points
This process of data has benefits for the financial industry because it can be transcribed without extensive processing, which ultimately cuts costs and creates a more agile performance.
Some Financial data structured services include:
- Trading systems (transaction data)
- Account systems (data on account holdings and movements)
- Market data from external providers
The process of a bank becoming agile will need to incorporate a variety of services. First, it is important for the bank to establish why becoming agile is important. What is moving the bank toward this shift? Is it to acquire new customers? To stay ahead of the competition?
Whatever the reason is, whether it is internal or external, finding out what the “change driver” is, provides a crucial first step to becoming agile. Once this is clear, it should be communicated to stakeholders and all internal members within the bank.
After understanding what is driving the change, then the proper steps to carry out the developments. For example, if the bank feels as if they are losing customers from lack of up to date technology, then operations can be implemented in order to establish new tech tools, like a mobile app. These decisions need to be strategic and involve all members of management. This way, the change can be effective and communicated properly.
Benefits Of Agile Banking
When a bank becomes agile, it becomes transformed in order to possess capabilities that can stand up to the on the go, always changing customer and rapid competition. Agile banking increases positive decision making because it provides innovation, that leverages existing opportunities but creates new ones as well.
“Agile banking aims at providing a full-fledged solution for an identified problem rather than a quick fix. It guides the banks towards innovation to leverage existing resources instead of having a blanket solution to hire an extra workforce to complete the task.” Triplepundit reports.
IoT And Streaming
IoT (internet of things) is a huge theme in financial services. This is because the industry adapted to mobile and ATM services for payment methods. Things are evolving in the sector, and IoT is affecting the industry as we know it. IoT has everything to do with data, which, as discussed before, plays a huge role in this industry.
“In the financial sector, streaming data can expand the speed, access, and ubiquity of market data throughout a financial firm’s trade lifecycle—lowering costs and usage, notably in the middle and back office.” Mapr reports.
ABOUT FSI TRANSFORMATION ASSEMBLY
Application to attend FSI Transformation Assembly taking place November 28-29, 2017 at Four Seasons Resort in Palm Beach, FL is now open.
Join experts from North America’s major financial services and insurance organizations like Keynote Speaker Scott Dillon, EVP, CTO and Head of Technology Infrastructure Services at Wells Fargo and Company. Scott will be providing unique insight into how his team provides availability, security, and global interconnectivity for the more than 70 million customers who interact 12 billion times a year in person through the company’s 9,000 stores and 12,000 ATMs, on the phone, or online at www.wellsfargo.com.
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C-level IT leaders in the financial services and insurance sectors are dealing with many challenges as digital transformation becomes an imperative. Understanding not only the convergence of Mobile, Social, and Cloud but also the possible implications of Artificial Intelligence, Machine Learning and Blockchain is vital to stay ahead of the competition.
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