Banks are one of the greatest engines for generating data: daily, they collectively produce petabytes of transactions, prices, risk metrics, customer information …. The re-regulation of the global banking sector and the associated drive for ever more transparency has only compounded a trend that was already astir. That explosion of data has always been seen as storage burden to accept, a complexity nightmare to cope with and a technology challenge to solve. No longer.
As the tech giants have demonstrated, data can be turned into an actual asset with a measurable value and a direct impact both revenues and profits. Achieving these objectives, however, require a complete change of approach:
- Data must be actively managed. The data and information generated within the multiple units of a CIB belong to the bank itself, not to the individual silos. Obviously, security and confidentiality rules must be abided to, but dedicated department must be in charge of data, its acquisition, management, its transformation and its monetisation. This is not that dissimilar to the way PMs are looking after they books and portfolios.
- The way IT systems are designed must be completely rethought. Traditionally, the process to architecture an IT platform is to start with existing user workflows, translate this workflows into specifications, turn these specifications into code and release the code as individual software components into production. With such an approach, data is effect nothing but the sum of all inputs and outputs of the various “brick” chained together. Instead, data and its complete life-cycles should be put at the centre of the architecture, in essence the thin red line that drive the whole information systems design process. With the adoption of this data-centric paradigm, IT systems become the components that can interact with the data: they create it, modify it, consume it, but the coherence and the continuity of the business activities lie with the data itself.
- Turning data into information and information into insights. However prolific financial institutions are at generating vast quantity of data, the reality is that only a fraction (maybe 10%) has any immediate business value. The focus should therefore be on extracting the information contained either intrinsically in each datum or revealed by the correlation of multiple sets. This is however only a first step, and the key differentiation comes from analysis the information and extracting insights that can support decisions by traders, sales, managers and customers.
Because of the transparency imposed both by regulators and competitive pressure, any business predicated on asymmetry of information is ultimately doomed. To compensate for that state of play, CIBs must now build asymmetries of insights and understanding, taking the right business decision because they “know and understand better” not just because they have a piece of information that others do not. Treating data as an asset is not just about curating and looking after it, it is about seeking ways to monetise the data and focusing on improving its tangible yield.
In the next article, we will be looking into the technologies fit for the “digital age”
Delta-X: The Digital Maturity Index for Investment Banks – How Do you Measure Up?