How banks use data

Banks around the world are being con­front­ed with a record num­ber of reg­u­la­tions, and those falling short of insti­tu­tion­al oblig­a­tions are pay­ing a high price for their errors.

In response, major finan­cial insti­tu­tions are grasp­ing big data solu­tions in a bid to com­ply with often dense reg­u­la­tions and reduce reg­u­la­to­ry breach­es.

“Con­sid­er­ing many banks have grown organ­i­cal­ly, often via merg­er and acqui­si­tion, their data is not always con­sis­tent and well organ­ised,” accord­ing to James Arnett, a part­ner at busi­ness and tech­nol­o­gy con­sult­ing firm Cap­co.

Mr Arnett believes that new tools can be cre­at­ed through the appli­ca­tion of data ana­lyt­ics, which will trans­form banks com­pli­ance pro­grammes from man­u­al, non-scal­able projects into low­er-cost and auto­mat­ed process­es.

“There is a real oppor­tu­ni­ty for bank­ing clients to embrace data ana­lyt­ics to answer the under­ly­ing theme of reg­u­la­tion strate­gi­cal­ly rather than to treat each reg­u­la­tion as a ‘tick-the-box’ exer­cise,” he says.

Big data

Suc­cess­ful big data plat­forms will do much more than just process all types of data, includ­ing trans­ac­tions, inter­nal doc­u­ments and cus­tomer com­ments.

“There should be a rich process-mod­el­ling capa­bil­i­ty that can be used to detect pat­terns based on pre­de­fined and pro­grammed reg­u­la­to­ry reports to quick­ly iden­ti­fy and risks,” says Frank Paler­mo, exec­u­tive vice pres­i­dent of glob­al dig­i­tal solu­tions at IT con­sul­tan­cy Vir­tusaP­o­laris.

In short, big data pro­grams need to ensure banks can proac­tive­ly man­age com­pli­ance risks, if the banks are to har­ness the full poten­tial of their data.

One of the more inno­v­a­tive ways banks can exploit big data is by join­ing togeth­er struc­tured cus­tomer feed­back with social media com­ments and oth­er unstruc­tured data to cre­ate a com­pre­hen­sive cus­tomer pro­file.

This data may already be acces­si­ble in sep­a­rate loca­tions, but by com­bin­ing all the data into a sin­gle data­base, it will be far eas­i­er for dif­fer­ent depart­ments to access and there­fore any com­plaints or reg­u­la­to­ry issues can be addressed effi­cient­ly.

Banks are also imple­ment­ing big data projects to gain a bet­ter under­stand­ing of the rela­tion­ships between dis­parate pieces of data, which tra­di­tion­al data­bas­es find dif­fi­cult to analyse mean­ing­ful­ly.

Big data solu­tions can offer banks much more than just effi­cient reg­u­la­to­ry com­pli­ance

Advanced data ana­lyt­ics tech­nolo­gies have the abil­i­ty to not only reveal impor­tant rela­tion­ships, but also map net­works around events, places and indi­vid­u­als, to help firms see the wider con­text of com­plex events.

Daniel Goz­man, lec­tur­er at Hen­ley Busi­ness School and co-author of the SWIFT Institute’s recent The Role of Big Data in Gov­er­nance report, believes that such tech­nolo­gies can be employed where the con­duct of indi­vid­u­als is ques­tioned by reg­u­la­tors.

“For exam­ple, in the LIBOR and FX rate-rig­ging inves­ti­ga­tions, big data eDis­cov­ery tools were employed to analyse, iden­ti­fy and dis­close doc­u­ments to reg­u­la­tors to estab­lish whether firms were involved. Such tech­nolo­gies may also be used in lit­i­ga­tion and employ­ment dis­putes,” says Dr Goz­man.

Sim­i­lar data analy­sis tools could assist banks in show­ing reg­u­la­tors that trades exe­cut­ed on behalf of clients were per­formed in the most advan­ta­geous way, with the abil­i­ty to exam­ine large trans­ac­tion-relat­ed data sets mak­ing the process of reg­u­la­to­ry report­ing quick­er and more trans­par­ent.

More advantages

But embrac­ing big data solu­tions can offer banks much more than just effi­cient reg­u­la­to­ry com­pli­ance, with invest­ment in cut­ting-edge tech­nol­o­gy hav­ing an impact in many areas.

“In a dig­i­tal econ­o­my, where the end-cus­tomer expe­ri­ence is every­thing, the abil­i­ty to per­form accu­rate, real-time analy­sis is vital to both com­pli­ance and com­pet­i­tive suc­cess,” says Rowan Scran­age, Europe, Mid­dle East and Africa vice pres­i­dent at data­base plat­form provider Couch­base.

The Com­pe­ti­tion and Mar­kets Authority’s Open Bank­ing Rev­o­lu­tion pro­gramme, which will require all banks to pro­vide a smart­phone app to cus­tomers con­tain­ing details of all their accounts held at any bank, is a per­fect oppor­tu­ni­ty to offer an improved cus­tomer expe­ri­ence through big data.

“In this envi­ron­ment, the win­ners will be those banks that remain com­pli­ant, while ensur­ing cus­tomers don’t want to leave because they receive the best pos­si­ble expe­ri­ence whether because it’s fast, per­son­alised or gives them the best pos­si­ble return on their invest­ment. Being able to analyse and act on cus­tomer data near-instan­ta­neous­ly will be crit­i­cal to pro­vid­ing this,” con­cludes Mr Scran­age.

Big data

More advantages