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

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Parijat Banerjee is the Global Business Head for the Banking, Financial Services and Insurance (BFSI) Sector Latent View Analytics,

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The pandemic pushed us forward for years, and the notion that every modern company is a technology company has only been reinforced by rapidly changing business practices. We are on the cusp of digital transformation, and precise analytics is driving the most successful innovation initiatives across multiple industries. The apparent rise of the connected ecosystem has forced consumers to engage with digital channels, and banking and financial services have evolved almost overnight.

The race for digital has always seemed easy, but adoption and implementation is an uphill climb, especially in the financial services industry, where traditional solutions and outdated IT infrastructure have a huge impact on business processes. Over the past 18 months, rapid improvements in digital technology have underpinned the evolution of banking to both internal processes and customer-facing experiences.

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As traditional financial institutions migrate from on-premises data centers to the cloud, questions arise as to how banks are adapting to the change while adhering to tighter regulations in risk management, fraud and information security. But without digital transformation, legacy institutions may lose out to their more agile competitors, such as those in fintech.

Based on my point of view, leading an analytics firm working with the banking, financial services and insurance (BFSI) sector, it is vital for the future success of these organizations that they focus on these three aspects holistically. Focus:

data reliability

Banking has always been innovative. From pneumatic tubes to the widespread use of ATMs, banks continue to lean towards innovation to enhance the customer experience. However, adoption of banking’s most recent effort – moving to the cloud – is proving more complicated.

As we embrace digital technologies, it is important to consider the role of data. In fact, in this connected ecosystem, whoever owns the data is the owner of the customer. However, being the only owner of the data is not the end of the story. By the time someone in an organization looks at a piece of data, it has been ingested, harmonized, normalized, and transformed many times to give context to it. This begs the question, “Can we trust our data? Is it valid?” And further, how does this knowledge affect our decision making?

To ensure that data serves its intended purpose, financial services organizations must focus on the importance of data governance, which includes some of the key aspects such as data lineage, data quality, and completeness of metadata. When we understand how our data is digested, we can make decisions with confidence without losing the whole picture.

For financial institutions, data governance is perhaps one of the most important components that drive risk management, credit decision making, fraud detection and regulatory compliance. It is also important for the real-time nature of data in financial services, which should ultimately help drive better services for its customers.

harnessing the power of data

Once we have determined the journey and quality of the data, we can begin to leverage it and move the analysis from insight to action to create strategies that drive company growth. For banks and financial services organizations, there are opportunities to use artificial intelligence and machine learning technologies – built on a foundation of data – to increase deposits, reduce fraud, and help address risk and financial crime.

For example, every bank and credit card company works to detect and prevent suspicious account activity so that they do not cause fraudulent losses and inconvenience to customers. On the other hand, overcorrecting and blocking everyday charges that make fraudulent claims can frustrate customers and ultimately lead to increased churn. This is where deep learning and advanced analytics can refine the already existing fraud models to ensure better stress testing with higher accuracy for better customer experience.

The capabilities of data-backed technologies are far-reaching in a world where data sets are vast and diverse, generating vast data volumes for high-end analysis.

the rise of the experience economy

The primary goal of digital transformation is to improve the customer experience and, in turn, help towards a stable society. In a connected digital ecosystem, customers expect all digital tools to work together and provide a seamless experience, irrespective of channel or platform.

The recent adoption of Open Banking represents a significant change in the industry – I believe it is likely to grow as customers learn of its benefits, from faster and safer payments to more reliable account aggregations. Going forward, customer retention will likely depend on the quality of the experience that the organization can offer. It is important for executive teams to ask themselves how they can seamlessly integrate the banking experience into the daily routine of their customers.

The way I see it, banks and financial institutions continue to be at the fore of innovation, especially as they immerse data and analysis at the core of their decision-making.

The change doesn’t stop when the switch to digital is complete. Set yourself up for success by deeply understanding your organization’s relationship with data and leveraging it to inform future innovation, as conviction and convenience never stay on the same block.

Businesshala Finance Council is an invitation-only organization for executives in successful accounting, financial planning and wealth management firms. am i eligible?


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