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The data dilemma: finance’s biggest challenge in 2022

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Between a changing market and rapidly evolving technology, data management is becoming the most important problem any financial firm must solve. The good news is that it’s also their biggest opportunity.

Across the financial services industry, many firms find themselves, if not quite in crisis, then certainly in interesting times. The Covid pandemic, coming at a time of already dramatic change, has highlighted existing weaknesses and created new urgency in the need for adaptation. And as these changes shake out, the players who do best at creating a robust data architecture will be the ones who come out on top.

What’s data got to do with it? Well, pretty much everything. Data sits at the intersection of market pressures – the push to innovate and win customer trust – and accelerating digital transformation. Effective data management is a critical element in riding both of these waves and even bringing them into alignment. Here’s why.

More pressure, more integration, more demands

Rising customer expectations and competition from non-traditional finance players – be they app startups, or internet platforms such as Google moving into the payments space – are just the start of the market challenges facing banks and insurers. To meet client expectations in a digital world, seamless cross-platform service provision is a must, as is unimpeachable data privacy.

Close collaboration between organizations is on the rise – whether in the case of older institutions partnering with the new fintechs, to deliver cutting-edge services and reach new markets, or closer engagement between different parties in the insurance stream to support the emerging “predict and prevent” model.

But these collaborations raise further data challenges. As does the new remote working model; it is by now clear that long after the pandemic is history, distributed teams will still be commonplace and employers will have to ensure that secure data access is not restricted to those behind the company firewall.

Of course, the other lingering Covid side effect for business will be the pressures on margins after years of unanticipated costs, and the need for insurers in particular to rebuild profitability as well as customer confidence. Meanwhile, within banking, tightening regulatory requirements for reporting as well as data management brings a raft of new demands.  

But there is a silver lining! Meeting those demands will deliver great benefits for the firm. Enforced adherence to strict standards will mean greater consistency and reduced redundancy in data processing, including far less need for laborious and costly reconciliations. The challenge is just delivering these efficiencies at a manageable cost.

Again, digitalization is not a new trend. But the pace and scale of the transformation under way is breath-taking, as is the quantity of data generated along the way. And with more data come more headaches. Between fintech partnerships, embedded banking and other collaborations, it’s a big tangle. In fact, a recent survey found that around half of financial organizations surveyed had more than 10 internal and external data sources to contend with (and, unsurprisingly, most of these said integration of this information was a challenge).

Of course the problem with all these data streams is that they lead to siloes, and inconsistencies. Enterprises need to use the data to drive decision making, improve customer service, fight fraud and reduce risk exposure… but none of these improvements can be realized without ensuring data accuracy and consistency, and making it accessible to all the right people across the organization, and their partner organizations. All without compromising confidentiality.

As many organizations move to cloud computing, with the increased flexibility and scalability it brings, there is scope for great improvements in workflow and control, as well as reduced costs and greater efficiency. At least, for those who succeed in creating an effective data architecture and integrating it with their legacy systems.

So what is to be done?

Innovation, efficiency and return on investment must be the top concerns for finance executives as they wrestle with all these issues. For all the challenges, it’s a pretty exciting time: new technology holds out the promise of such enormous gains in data-driven insights, customer-focused service development, radically streamlined processes, greater resilience. These are really juicy rewards for those who get it right.

Of course for many organizations within the sector, cumbersome and fragmented legacy tech will be a drag on innovation, but businesses with an eye on the prize can’t afford to let that happen. Sorting out the data tangle isn’t just an obligation handed down by regulators, it’s an imperative arising from competitive pressures, and a golden opportunity.

Some forward-thinking enterprises are introducing blockchain solutions to address similar data problems. Consider Maersk’s TradeLens platform, designed to ensure fast, accurate, consistent exchange of information between the multiple stakeholders in a supply chain.

Blockchain’s transparency and security advantages do make it a natural fit, but for many enterprises, the barrier to adoption seems high. The technology is still not widely understood, and there is the company’s existing architecture to think of: how can it all be brought on chain without a major long-term project at significant cost?

Get the benefits, cut the costs and keep adapting 

This is where modular solutions come into play. Geeq Data, for instance, is a flexible add-on data consistency layer that can be plugged into existing systems as needed. By adding value at every step and never requiring a change of workflow, this delivers the rapid results that enterprises need at a fraction of the cost of ground-up data integration projects. It’s an innovative approach to solving the data visibility and consistency challenge that pairs well with other organizational efforts to ensure data standardization (as required by regulators) and interconnectedness. 

Terms like “future-proofing” get thrown around a lot in IT recommendations. But is that even possible, given the pace of change and the number of unknowns every new innovation introduces? Planning for the next five years will certainly include adopting some form of blockchain – but by then, some blockchain technologies will already be outdated, and new, emerging threats will reveal the vulnerabilities of today’s solutions. However, smart management can certainly improve an organization’s resilience.

With all trends pointing to a pressing need for better data integration, a single source of truth and robust security, CIOs should look for the best ways to achieve these goals with a responsive, flexible, scalable architecture. Those who choose their partners carefully, who have developed secure, modular, blockchain-powered data tools at an affordable cost, will have a great advantage in the market – and will be better placed than the rest to face whatever the next crisis turns out to be. 

Author: Ric Asselstine

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