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The Ones Not Screwing Up with Compliance Will Win

A few weeks ago, a regional US bank asked me to perform some compliance and use case analysis around fixing their data management situation.  This bank prides itself on customer service and SMB focus, while using large-bank product offerings.  However, they were about a decade behind the rest of most banks in modernizing their IT infrastructure to stay operationally on top of things.

compliance

Bank Efficiency Ratio per AUM (Assets under Management), bankregdata.com

This included technologies like ESB, BPM, CRM, etc.  They also were a sub-optimal user of EDW and analytics capabilities. Having said all this; there was a commitment to change things up, which is always a needed first step to any recovery program.

THE STAKEHOLDERS

As I conducted my interviews across various departments (list below) it became very apparent that they were not suffering from data poverty (see prior post) but from lack of accessibility and use of data.

  • Compliance
  • Vendor Management & Risk
  • Commercial and Consumer Depository products
  • Credit Risk
  • HR & Compensation
  • Retail
  • Private Banking
  • Finance
  • Customer Solutions

FRESH BREEZE

This lack of use occurred across the board.  The natural reaction was to throw more bodies and more Band-Aid marts at the problem.  Users also started to operate under the assumption that it will never get better.  They just resigned themselves to mediocrity.  When some new players came into the organization from various systemically critical banks, they shook things up.

Here is a list of use cases they want to tackle:

  • The proposition of real-time offers based on customer events as simple as investment banking products for unusually high inflow of cash into a deposit account.
  • The use of all mortgage application information to understand debt/equity ratio to make relevant offers.
  • The capture of true product and customer profitability across all lines of commercial and consumer products including trust, treasury management, deposits, private banking, loans, etc.
  • The agile evaluation, creation, testing and deployment of new terms on existing and products under development by shortening the product development life cycle.
  • The reduction of wealth management advisors’ time to research clients and prospects.
  • The reduction of unclaimed use tax, insurance premiums and leases being paid on consumables, real estate and requisitions due to the incorrect status and location of the equipment.  This originated from assets no longer owned, scrapped or moved to different department, etc.
  • The more efficient reconciliation between transactional systems and finance, which often uses multiple party IDs per contract change in accounts receivable, while the operating division uses one based on a contract and its addendums.  An example would be vendor payment consolidation, to create a true supplier-spend; and thus, taking advantage of volume discounts.
  • The proactive creation of central compliance footprint (AML, 314, Suspicious Activity, CTR, etc.) allowing for quicker turnaround and fewer audit instances from MRAs (matter requiring attention).

MONEY TO BE MADE – PEOPLE TO SEE

Adding these up came to about $31 to $49 million annually in cost savings, new revenue or increased productivity for this bank with $24 billion total assets.

So now that we know there is money to be made by fixing the data of this organization, how can we realistically roll this out in an organization with many competing IT needs?

The best way to go about this is to attach any kind of data management project to a larger, business-oriented project, like CRM or EDW.  Rather than wait for these to go live without good seed data, why not feed them with better data as a key work stream within their respective project plans?

To summarize my findings I want to quote three people I interviewed.  A lady, who recently had to struggle through an OCC audit told me she believes that the banks, which can remain compliant at the lowest cost will ultimately win the end game.  Here she meant particularly tier 2 and 3 size organizations.  A gentleman from commercial banking left this statement with me, “Knowing what I know now, I would not bank with us”.  The lady from earlier also said, “We engage in spreadsheet Kung Fu”, to bring data together.

Given all this, what would you suggest?  Have you worked with an organization like this? Did you encounter any similar or different use cases in financial services institutions?

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This entry was posted in Banking & Capital Markets, Data Quality, Financial Services, Governance, Risk and Compliance and tagged , , , . Bookmark the permalink.

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