Tag Archives: Financial Services

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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Posted in Banking & Capital Markets, Data Quality, Financial Services, Governance, Risk and Compliance | Tagged , , , | Leave a comment

Major Financial Services Institution uses technology to improve your teller experience

Financial Services

Major Financial Services Institution uses technology to improve your teller experience

Like many American men, I judge my banking experience by the efficiency of my transaction time. However, my wife often still likes to go into the bank and see her favorite teller.

For her, banking is a bit more of a social experience. And every once in a while, my wife even drags into her bank as well.  But like many of my male counterparts, I still judge the quality of the experience by the operational efficiency of her teller. And the thing that I hate the most is when our experience at the bank is lengthened when the teller can’t do something and has to get the bank manager’s approval.

Now, a major financial institution has decided to make my life and even my wife’s life better. Using Informatica Rulepoint, they have come up with a way to improve teller operational efficiency and customer experience while actually decreasing operational business risks. Amazing!

How has this bank done this magic? They make use of the data that they have to create a better banking experience. They already capture historical transactions data and team member performance against each transaction in multiple databases. What they are doing now is using this information to make better decisions. With this information, this bank is able to create and update a risk assessment score for each team member at a branch location. And then by using Informatica Rulepoint, they have created approximately 100 rules that are able change teller’s authority based upon the new transaction, the teller’s transaction history, and the teller’s risk assessment score. This means that if my wife carefully picks the right teller, she is speed through the line without waiting for management approval.

So the message at this bank is the fastest teller is the best teller. To me this is really using data to improve  customer experience and allow for less time in a line. Maybe I should get this bank to talk next to my auto mechanic!

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Banking and Insurance Sessions at Informatica World 2014

Informatica World 2014Financial services is one of the most data-centric industries in the world.  Clean, connected, and secure data is critical to satisfy regulatory requirements, improve customer experience, grow revenue, avoid fines, and ultimately change the world of banking and insurance. Data management improvements have been made and several of the leading companies are empowered by Informatica.

Who are these companies and what are they doing with Informatica?

To find out more, register and attend Informatica World 2014, May 12-15 at the Cosmopolitan Hotel, in Las Vegas.

Fifteen of the top financial services companies will share their stories and success leveraging Informatica for their most critical business needs. These include:

Informatica World 2014 will have over 100 breakout sessions covering a wide range of topics for Line of Business Executives, IT decision makers, Architects, Developers, and Data Administrators. Our great keynote line up includes Informatica executives Sohaib Abbasi (Chief Executive Officer), Ivan Chong (Chief Strategy Officer), Marge Breya (Chief Marketing Officer) and Anil Chakravarthy (Chief Product Officer). Our series of speakers will share Informatica’s vision for this new data-centric world and explain innovations that will propel the concept of a data platform to an entirely new level.

Register today so you don’t miss out.

We look forward to seeing you in May!

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Posted in Business Impact / Benefits, Financial Services, Informatica World 2014 | Tagged , , , | Leave a comment

Customer Centric Financial Services

Customer Centric Finance eBookThe business of financial services is transforming before our eyes. Traditional banking and insurance products have become commoditized. As each day passes, consumers demand increasingly personalized products and services. Social and mobile channels continue to overthrow traditional communication methods. To survive and grow in this complex environment, financial institutions must do three things:

  1. Attract and retain the best customers
  2. Grow wallet share
  3. Deliver top-notch customer experience across all channels and touch points

The finance industry is traditionally either product centric or account centric. However, to succeed in the future, financial institutions must become customer centric. Becoming customer-centric requires changes to your people, process, technology, and culture. You must offer the right product or service to the right customer, at the right time, via the right channel. To achive this, you must ensure alignment between business and technology leaders. It will require targeted investments to grow the business, particularly the need to modernize legacy systems.

To become customer-centric, business executives are investing in Big Data and in legacy modernization initiatives. These investments are helping Marketing, Sales and Support organizations to:

  • Improve conversion rates on new marketing campaigns on cross-sell and up-sell activities
  • Measure customer sentiment on particular marketing and sales promotions or on the financial institution as a whole
  • Improve sales productivity ratios by targeting the right customers with the right product at the right time
  • Identify key indicators that determine and predict profitable and unprofitable customers
  • Deliver an omni-channel experience across all lines of business, devices, and locations

At Informatica, we want to help you succeed. We want you to maximize the value in these investments. For this reason, we’ve written a new eBook titled: “Potential Unlocked – Improving revenue and customer experience in financial services”. In the eBook, you will learn:

  • The role customer information plays in taking customer experience to the next level
  • Best practices for shifting account-centric operations to customer-centric operations
  • Common barriers and pitfalls to avoid
  • Key considerations and best practices for success
  • Strategies and experiences from best-in-class companies

Take a giant step toward Customer-Centricity: Download the eBook now.

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Posted in Banking & Capital Markets, Financial Services | Tagged , , | Leave a comment

Financial Services Sessions at Informatica World 2013

Data is one of the most important and value assets to banks and insurance companies across the globe to help comply with industry regulations, improve customer experience, find new revenue opportunities, and reduce the cost of doing business. These are universal needs and challenges and Informatica’s industry leading solutions have helped over 780 financial services institutions increase their potential to achieve business success.

At Informatica World 2013, June 4-7 at the Aria Resort and Casino in Las Vegas, Nevada, we will be showcasing a wealth of valuable information to maximize value from your data assets and technology investments. The event includes over 100 interactive and informative breakout sessions across 6 dedicated tracks on (Platform & Products, Architecture, Best Practices, Big Data, Hybrid IT and Tech Talk).

There will also be a financial services path including guest speakers from the banking and insurance industry and from our Financial Services experts including:

  • Morgan Stanley Wealth Management: Accelerating Business Growth While Protecting Sensitive Data: Find how Morgan Stanley built one of the largest Informatica platforms to mask and process over 150 thousand objects used by more than 1,000 applications globally and comply with today’s data privacy regulations.
  • Wells Fargo Bank’s Data Governance Journey with Informatica: Hear and learn about Wells Fargo’s data governance strategy, program, and how Informatica is used to deliver actionable, transparent, and trusted data to the business.
  • Liberty Mutual Insurance:  Architecture and Best Practices with Informatica Data Integration:  Learn how Informatica Data Integration’s metadata-driven architecture helps scale and support large data volumes and meet enterprise Liberty Mutual’s demands for performance and compliance.
  • Addressing Top Business Priorities in Banking and Insurance with MDM: Peter Ku, Senior Director of Financial Services Industry solutions share how Master Data Management is being used in Banking and Insurance to help address top business imperatives from regulatory compliance to finding new revenue opportunities. 

Register today at www.informaticaworld.com and I look forward to seeing you there!

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Bankers, Insurers – How Customer Centric Are You?

The need to be more customer-centric in financial services is more important than ever as banks and insurance companies look for ways to reduce churn as those in the industry know that loyal customers spend more on higher margin products and are likely to refer additional customers. Bankers and insurers who understand this, and get this right, are in a better position to maintain profitable and lasting customer loyalty and reap significant financial rewards. The current market conditions remain significant and will be difficult to overcome without the right information management architecture to help companies be truly customer centric. Here’s why:

  • Customer satisfaction with retail banks has decreased for four consecutive years, with particularly low scores in customer service.[1] Thirty-seven percent of customers who switched primary relationships cited in an industry survey showed poor customer service as the main reasons.
  • The commoditization of traditional banking and insurance products has rapidly increased client attrition and decreased acquisition rates. Industry reports estimate that banks are losing customers at an average rate of 12.5% per year, while average acquisition rates are at 13.5%, making acquisitions nearly a zero-sum game. Further, the cost of acquiring new customers is estimated at five times the rate of retaining existing ones.
  • Switching is easier than ever before. Customer churn is at an all-time high in most European countries. According to an industry survey, 42 percent of German banking customers had been with their main bank for less than a year. As customer acquisition costs running between of €200 to €400, bankers and insurers need to keep their clients at least 5 to 7 years to simply break even.
  • Mergers and acquisitions impact even further the complexity and risks of maintaining customer relationships. According to a recent study, 17 percent of respondents who had gone through a merger or acquisition had switched at least one of their accounts to another institution after their bank was acquired, while an additional 31 percent said they were at least somewhat likely to switch over the next year.[2]

Financial services professionals have long recognized the need to manage customer relationships vs. account relationships by shifting away from a product-centric culture toward a customer-centric model to maintain client loyalty and grow their bottom lines organically. Here are some reasons why:

  • A 5% increase in customer retention can increase profitability by 35% in banking, 50% in brokerage, and 125% in the consumer credit card market.[3]
  • Banks can add more than $1 million to the profitability of their commercial banking business line by simply extending 16 of these large corporate relationships by one year, or by saving two such clients from defecting. In the insurance sector, a one percent increase in customer retention results in $1M in revenue.
  • The average company has between a 60% and 70% probability of success selling more services to a current customer, a 20% to 40% probability of selling to a former customer, and a 5% to 20% probability of making a sale to a prospect.[4]
  • Up to 66% of current users of financial institutions’ social media sites engage in receiving information about financial services, 32% use it to retrieve information about offers or promotions and 30% to conduct customer service related activities.[5]

So what does it take to become more Customer-centric?

Companies who have successful customer centric business models share similar cultures of placing the customer first, people who are willing to go that extra mile, business processes designed with the customer’s needs in mind, product and marketing strategy that is designed to meet a customer’s needs, and technology solutions that helps access and deliver trusted, timely, and comprehensive information and intelligence across the business. These technologies include

Why is data integration important? Customer centricity begins with the ability to access and integrate your data regardless of format, source system, structure, volume, latency, from any location including the cloud and social media sites. The data business needs originates from many different systems across the organization and outside including new Software as a Service solutions and cloud based technologies. Traditional hand coded methods and one off tools and open source data integration tools are not able to scale and perform to effectively and efficiently access, manage, and deliver the right data to the systems and applications in the front lined. A the same time, we live in the Big Data era with increasing transaction volumes, new channel adoption including mobile devices and social media combined generating petabytes of data of which to support a capable and sustainable customer centric business model, requires technology that can handle this complexity, scale with the business, while reducing costs and improving productivity.

Data quality issues must be dealt with proactively and managed by both business and technology stakeholders.  Though technology itself cannot prevent all data quality errors from happening, it is a critical part of your customer information management process to ensure any issues that exist are identified and dealt with in an expeditious manner. Specifically, a Data Quality solution that can help detect data quality errors in any source, allow business users to define data quality rules, support seamless consumption of those rules by developers to execute, dashboards and reports for business stakeholders, and ongoing quality monitoring to deal with time and business sensitive exceptions. Data quality management can only scale and deliver value if an organization believes and manages data as an asset. It also helps to have a data governance framework consisting of processes, policies, standards, and people from business and IT working together in the process.

Lastly, growing your business, improving wallet share, retaining profitable relationships, and lowering the cost of managing customer relationships requires a single, trusted, holistic, and authoritative source of customer information.  Managing customer information has historically been in applications across traditional business silos that lacked any common processes to reconcile duplicate and conflicting information across business systems.  Master Data Management solutions are purposely designed to help breakdown the traditional application and business silos and helps deliver that single view of the truth for all systems to benefit.  Master Data Management allows banks and insurance companies to access, identity unique customer entities, relate accounts to each customer, and extend that relationship view across other customers and employees including relationship bankers, financial advisors, to existing agents and brokers.

The need to attract and retain customers is a continuous journey for the financial industry however that need is greater than ever before. The foundation for successful customer centricity requires technology that can help access and deliver trusted, timely, consistent, and comprehensive customer information and insight across all channels and avoid the mistakes of the past, allow you to stay ahead of your competition, and maximize value for your shareholders.

[1] 2010 UK Retail Banking Satisfaction Study, J.D. Power and Associates, October 2010.

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Posted in Customer Acquisition & Retention, Data Governance, Data Integration, Data Quality, Financial Services, Master Data Management, Vertical | Tagged , , , , , , , | Leave a comment

Maximize the Potential Business Value from New Core Banking/Insurance Application Investments

 

According to the IDC Financial Insights 2013 Predictions report, financial institutions across most regions are getting serious about updating their legacy systems to improve reduce operating costs, automate labor intensive processes, improve customer experiences, and avoid costly disruptions. Transforming a bank’s core systems or insurance provider’s main business systems is a strategic decision that has far-reaching implications on the firm’s future business strategies and success. When done right, the capabilities offered in today’s modern banking and insurance platforms can propel a company in front of their competition or be the nail in the coffin if your data is not migrated correctly, safeguards are not in place to protect against unwanted data breaches, and if you are not able to decommission those old systems as planned.  

One of the most important and critical phases of any legacy modernization project is the process of migrating data from old to new.  Migrating data involves:

  • Ability to access existing data in the legacy systems
  • Understand the data structures that need to be migrated
  • Transform and execute one-to-one mapping with the relevant fields in the new system
  • Identify data quality errors and other gaps in the data
  • Validate what is entered into the new system by identifying transformation or mapping errors
  • Seamlessly connect to the target tables and fields in the new system

Sounds easy enough right?  Not so fast! (more…)

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Posted in Application ILM, Application Retirement, Data Archiving, Data Governance, Data Integration, Data Quality, Financial Services | Tagged , , , , , | 1 Comment

Reliable, Trusted, and Accurate Data is More Important for Insurance Companies Post-Hurricane Sandy

Like most Americans last week, I was glued to the news several days prior to Hurricane Sandy hitting landfall on the East Coast of the United States, hoping it would pass with minimal damage. Having lived in Hawaii and Florida for most of my life, I personally experienced three hurricanes and know how devastating these natural disasters can be during the storm and the hardships people go through afterwards. My thoughts are with all those who lost their lives and their belongings due to this disaster.

Hurricane Sandy has been described as one of the largest storms both in size and in property damage to homes and businesses. According to the New York Times, the total economic damage from Hurricane Sandy will range between $10 to $20 billion with insurance companies paying for $5 to $10 billion in insurance claims. At the high end of that range, Sandy would become the third-most expensive storm for insurers in U.S. history. As property, casualty and flood insurance companies prepare to face a significant wave of calls and claims requests from policyholders, I wonder what the implications and costs will be for these companies who lack reliable, trusted and accurate data which has plagued the industry industry for years.

Reliable, trusted, and accurate data is critical in helping insurance companies manage their business from satisfying regulatory requirements, maintaining and growing customer relationships, combating fraud, to reducing the cost of doing business. Unfortunately, many insurance companies, large and small, have long operated on paper-based processes to onboard new customers, manage policy changes and process claim requests. Though some firms have invested in data quality and governance practices in recent years, the majority of today’s insurance industry has ignored the importance of managing and governing good quality data and dealing with the root causes to bad data including:

  • Inadequate verification of data stored in legacy systems
  • Non-validated data leaks and data entry errors made by human beings
  • Inadequate or manual integration of data between systems
  • Redundant data sources/stores that cause data corruption to dependent applications
  • Direct back-end updates with little to no data verification and impact analysis

Because of this, the data in core insurance systems can contain serious data quality errors including:

  • Invalid property addresses
  • Policyholder contact details (Name, Address, Phone numbers)
  • Policy codes and descriptions (e.g. motor or home property)
  • Risk rating codes
  • Flood zone information
  • Property assessment values and codes
  • Loss ratios
  • Claims adjuster estimates and contact information
  • Lack of a comprehensive view of existing policyholder information across different policy coverage categories and lines of business

The cost of bad data can be measured in the following areas as firms gear up to deal with the fallout of Hurricane Sandy:

  • Number of claims errors multiplied by the time and cost to resolve these errors
  • Number of phone calls and emails concerning claims processing delays multiplied by the time per phone call and the cost per Customer Service Rep or field agents handling those requests
  • Number of fraudulent claims and the loss of funds from those criminal activities
  • Number of policy cancellations caused by poor customer service experienced by existing policy holders
  • Not to mention the reputational damage caused by poor customer service

Having a sound data quality practice requires a well-defined data governance framework consisting of the following elements:

  • Data quality policies that spell out what data are required, how they should be used, managed, updated and retired. More importantly, these policies should be aligned to the company’s goals, defined and maintained by the business, not IT.
  • Data quality processes that involve documented steps to implement and enforce the policies described above.
  • Specific roles including data stewards that represent business organizations, core systems (i.e. Underwriting Data Steward), or Data Category stewards who understand the business definition, requirements and usage of key data assets by the business.

Finally, in addition to the points listed above, firms must not discount or ignore the importance of having industry leading data quality software solutions to enable an effective and sustainable data quality practice including:

  • Data profiling and auditing to identify existing data errors in source systems, during data entry processes and as data is extracted and shared between systems.
  • Data quality and cleansing to build and execute data quality rules to enforce the policies set forth by the business.
  • Address Validation solutions to ensure accurate address information for flood zone mapping and loss analysis
  • Data Quality dashboards and monitoring solutions to analyze the performance and quality levels of data and escalate data errors that require immediate attention.

As cleanup activities progress and people get back on their feet from Hurricane Sandy, insurance companies should take the time to measure how well they are managing their data quality challenges and start looking at addressing them in preparation for these inevitable events caused by Mother Nature.

 

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Financial Stability Board Pushes Legal Entity Identifier to the G20– Vote Expected this Month – What’s Next?

Hot off the press! The Financial Stability Board (FSB) published today (June 8th, 2012) a report entitled “A Global Legal Entity Identifier for Financial Markets”  for the G20 supervisors for consideration and response to the mandate issued by the G20 at the Cannes Summit for a final vote at the end of the month in Mexico. It sets out 35 recommendations for the development and implementation of the global LEI system. These recommendations are guided by a set of “High Level Principles” which outline the objectives that a global LEI system should meet.

The proposed global Legal Entity Identifier (LEI) is expected to help regulators identify unique counterparties across the financial system and monitor the impact of risky counterparties holding positions with the banks. Assuming LEI is approved by the G20 this month, it will be the first of these infrastructure standards to be implemented globally requiring firms to integrate, reconcile and cross-reference the new LEI with existing counterparty identifiers and information, as well as manage accurate and current legal hierarchies.   (more…)

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Posted in Financial Services, Governance, Risk and Compliance, Master Data Management, Vertical | Tagged , , , , , , , | Leave a comment

Data Retention Requirement in Financial Services – What Are They? Why is it so Hard?

The need for more robust data retention management and enforcement is more than just good data management practice. It is a legal requirement for financial services organizations across the globe to comply with the myriad of local, federal, and international laws that mandate the retention of certain types of data for example:

  • Dodd-Frank Act: Under Dodd-Frank, firms are required to maintain records for no less than five years.
  • Basel Accord: The Basel guidelines call for the retention of risk and transaction data over a period of three to seven years. Noncompliance can result in significant fines and penalties.
  • MiFiD II: Transactional data must also be stored in such a way that it meets new records retention requirements for such data (which must now be retained for up to five years) and easily retrieved, in context, to prove best execution.
  • Bank Secrecy Act: All BSA records must be retained for a period of five years and must be filed or stored in such a way as to be accessible within a reasonable period of time.
  • Payment Card Industry Data Security Standard (PCI): PCI requires card issuers and acquirers to retain an audit trail history for a period that is consistent with its effective use, as well as legal regulations. An audit history usually covers a period of at least one year, with a minimum of three months available on-line.
  • Sarbanes-Oxley:Section 103 requires firms to prepare and maintain, for a period of not less than seven years, audit work papers and other information related to any audit report, in sufficient detail to support the conclusions reached and reported to external regulators.

Each of these laws have distinct data collection, analysis, and retention requirements that must be factored into existing information management practices. Unfortunately, existing data archiving methods including traditional database and tape backup methods lack the required capabilities to effectively enforce and automate data retention policies to comply with industry regulations.  In addition, a number of internal and external challenges make it even more difficult for financial institutions to archive and retain required data due to the following trends: (more…)

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Posted in Application ILM, Big Data, CIO, Database Archiving, Enterprise Data Management, Financial Services, Vertical | Tagged , , | 1 Comment