Home Banking Retail Banking: Using Data to Take Back Control

Retail Banking: Using Data to Take Back Control

by internationalbanker

By Neil Vernon, CTO, Gresham Technologies





With firms pushing the boundaries of innovation, having the right retail banking control frameworks in place can mean the difference between success and failure.

The retail banking industry is undergoing a significant period of transformation. Changes in consumer behaviour, technological developments, and regulatory requirements, are all creating new demands.

Consumers now want to open savings accounts in seconds, have a mortgage in minutes, and open a business account with one click. At the same time, we are seeing an increase in digital payments, rising regulatory pressures, and more competition as nimble challenger banks and big tech companies enter the world of financial services.

There’s also the challenge of retaining and engaging with customers, especially with initiatives such as the seven-day switch in the UK making it easier to jump from one provider to another.

What’s more, negative interest rates and slowdowns in consumer spending across many markets are threatening the profitability of retail banking services, increasing the pressure to innovate.

There’s a lot to keep banks on their toes. But there is a solution. Data.

Relevant and validated data that can be easily reconciled and controlled. Trusted data to base business decisions on. Here are three reasons why having the right processes and controls around data in place will be the foundation to ensuring banks can survive the change and evolve for the better.

Legacy technology is holding banks back

Whilst addressing years of legacy issues may be daunting, the key is to tackle the underlying problems that stop progress. If you have the right data available at the right time, you can understand customer behaviour and adapt at speed.

Legacy technology not only makes it difficult for banks to use their data, it also limits their ability to depend on it. Banks need to ensure that they have controls in place which can support their complex, unstructured data flows. Spreadsheets and other manual workarounds are simply too vulnerable to operational failure or human error to give businesses true data confidence.

It’s all about having a data-agnostic and data-at-scale solution, which can bring data from multiple sources and siloes across an organisation together. With the pace of innovation and change in the retail sector, the only approach is to have all your controls in one strategic solution, bringing together data from touchpoints and systems across the organisation. Not only does this increase efficiency, but it also increases business control in a fast-changing and demanding environment.

Keeping pace with change

Innovative new products can require different kinds of control frameworks with an agile, flexible approach. But behind the scenes, banks’ infrastructure and data make this difficult. Extensive M&A activity in the retail banking sector has created a tangled web of interconnected technology which is not always well understood, and has resulted in siloed data in different formats and systems. This puts those responsible for building controls on the back foot from the start!

Regulatory activity only adds to the pressure. Post-financial crisis, regulators have focused on ensuring that consumers have more knowledge of, and control over, their banking products and services. Whilst the industry has welcomed this, it also requires banks to have data and controls which allow them to say with confidence that these obligations have been met – and to demonstrate this to the regulator – if required.

Banks also have to contend with expectations that are higher than ever, as customers demand 24/7 service at their fingertips. Firms are developing highly innovative solutions in response, but the controls which sit behind them must also support this. This concept is still relatively new to retail banking, and the greater the demand for immediacy, the smaller the window to manage any issues which might impact the customer. The consequences of a control failure are arguably more visible – and more severe – in the retail banking space due to the real-time effect on individual consumers.

Retail banks are not only facing more demanding customers, but also a more dynamic competitive landscape. Bank profits dropped as a result of the Covid-19 pandemic, and competition from new market entrants such as challenger banks and neobanks grew to squeeze margins. In fact, these providers are continuing to attract more and more customers: according to Capgemini’s Covid-19 research, 36% of customers discovered a new financial provider during the crisis and plan to continue with them post-pandemic, as 55% of fintech customers said they were satisfied with their provider’s offerings. Unconstrained by legacy systems and data in the same way as their incumbent peers, these challengers can focus more on the customer, whilst also experiencing cost benefits, unrequired to devote vast sums to managing or maintaining outdated technology.

Automate to drive efficiency

With one estimate suggesting that retail banks could expect at least a 20% fall in revenue, it’s clear that the pressure is on ‘to do more with less’. Automation initiatives in retail banking have been widespread over the past few years, with a focus on customer-facing areas – for example, the increasing use of automation in the branch experience, the use of robo-advisory services, and chatbots. However, the opportunity is just as great – if not greater – in the back office, particularly when it comes to data and controls.

Not only does the automation of manual processes free up staff to tackle more demanding challenges, it also reduces complexity. By eliminating the host of manual workarounds which have built up in banks where legacy technology is unable to accommodate business requirements, automation can create simpler, streamlined processes which are far more cost-effective to run. This reduces the burden on IT teams, which are also under a great deal of pressure to support innovation initiatives and can often be a bottle neck to getting control onboarding or transformation completed. There are also significant operational risks associated with manual processes – breakdown, human error, key person risk – which can be minimised or removed altogether through the increased use of automation.

It’s clear that retail banks need to start taking a more strategic approach to their technology and data. Many have ended up with multiple instances of legacy systems which are cost heavy to implement and run and are simply not designed for a fast-paced digital world and the customer expectations that come with this. Emerging digital technologies also rely on different architectures, meaning that banks must modernise in order to take advantage of these. Established retail banks are competing not only with challengers and fintechs, but also the tech giants who are hungry to enter the banking space and eat their lunch. These companies are the original pioneers of data driven decision making. Not only do they know everything possible about their customers, they also structure and store this data in such a way that it is truly at the heart of everything they do.

Taking back control of your data puts you back in control of your destiny. Banks which are unable to have even the simplest discussions about new products or customer initiatives without the data problem rearing its ugly head simply cannot hope to compete and will, inevitably, fall further behind – or worse still – be forgotten.


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