Why MDM in Financial Services in 2016?

Need for MDM

Another year has come to an end and like every year, industry experts have their predictions on what to expect in the yew year.  Similar to recent years, many banks and insurance companies remain steadfast to address the industry’s most pressing imperatives including:

  • Regulatory compliance:  With new regulations like BCBS 239, MiFiD II, and the European Payment Services Directive II and existing ones including CCAR, FATCA, and KYC/AML it’s all hands on deck for banks and capital markets firms to ensure they can measure risk at an enterprise and global perspective.
  • Improve customer experience:  Call it omni-channel, cross channel, it’s all much the same as banks and insurance companies are stepping up their investments to modernize customer facing systems, core banking and insurance platforms, and payments infrastructure.
  • Increase wallet share:  Despite past efforts, wallet share with existing customers across banking and insurance remains low across regions, averaging 2.5 products per customer relationship whereas the average consumer holds 7-8 business relationships with the industry.  In response, the industry is focused on developing personalized bundles and offers to drive adoption.
  • Industry consolidation:  Analysts predict the rise of new mergers and acquisitions across all sectors of financial services as firms look to grow market share through acquisition.

All of these imperatives point to the importance of having consistent, comprehensive, and timely master and reference data available to the business.  From a technology perspective, we are talking about the importance of having an enterprise class Master Data Management (MDM) solution.

What is Master Data Management (MDM)?

In a nutshell, Master data management (MDM) is a methodology that identifies the most critical information within an organization—and creates a single source of its truth to power business processes.MDM involves a number of technology solutions, including data integration, data quality, and business process management (BPM). A capable MDM solution delivers:

  • A single view of the data—Creating a single, authoritative view of business-critical data from disparate, duplicate, and conflicting information lets you see, for instance, that ABC Corp. and ABC Limited are related entities.
  • A 360-degree view of the relationships—Business rules let you identify the relationships among the data, so you can combine data showing ABC Corp employs 350 people who are also mortgage holders with your institution and is a guarantor of a corporate bond instrument issued by your investment bank.
  • A complete view of all interactions—Integrating the transactions and interactions that have occurred with that product, customer, counterparty, or other data element gives you a complete view of that customer.

What are the benefits of adopting MDM?

Adopting MDM allows financial institutions to:

  • Improve risk management and regulatory compliance by ensuring corporate risk and compliance teams have access to the latest and most accurate counterparty and legal entity data from internal systems and external data providers, accurately define the legal hierarchy relationships between them, and relate them to your securities instruments to manage risk correctly and comply with BCBS 239, MiFiD II, CCAR, and other risk related regulations.
  • Drive more effective campaigns by delivering Sales and Marketing teams comprehensive views of their customers, relationships with outstanding and current accounts, other customers/prospects, and employees.  More importantly, feel confident that when critical information changes in any system that MDM identifies that change, updates the existing record, and synchronizes it back to other systems that require that updated record in real-time.
  • Support an omni-channel customer experience by ensuring new system and application investments have access to the most accurate and comprehensive information accessible to customers regardless of touchpoint all in real-time.
  • Expedite post M&A requirements by onboarding, rationalizing, and delivering customer, product, employee, and other critical business data to support consolidated financial reporting, risk management, cross sell marketing campaigns, and other post M&A business needs.

How do you chose the right MDM solution?

Not all MDM solutions are the same. Given these market trends, it is important to look at the following capabilities when investing in an MDM platform including:

  1. Universal Data Access:  The solution you choose should have the ability to access this data from disparate systems, govern, update, and share the latest trusted record back and forth from any system, application, on premise, or in the cloud. Given the sheer number of systems in today’s financial services company, being locked out of your data is a show stopper.
  2. Built in Data Governance:  Look for a solution that allows business users to collaborate with data stewards and IT to access, govern, and share comprehensive master (e.g. customer, product, employee, counterparties, securities instrument) data.  In addition, look for a solution that provides flexibility in your governance process through configurable workflows and business process orchestration.
  3. Business Rules based Relationships: Look for a solution that allows you to create business rules to define the relationships between each domain for greater insight and value.
  4. Built to grow with your business needs:  You may start with a single domain (e.g. Customers) however look for a solution that can manage multiple domains in a single solution.
  5. Proven success and adoption:  Experience and success goes without saying. It is important to look for a solution that has adoption in the market. Don’t rely on fancy marketing verbiage and a savvy sales person. Look for evidence of adoption.

Where to start?

Regardless if this is your first or third time investing in MDM it’s helpful to get up to speed. Here are some resources to help you in your MDM Journey.

  • Download the Data drives profit in the data-ready enterprise e-Book
  • Download the Roadmap to Successful Customer Centricity in Financial Services e-Book
  • Download the Informatica Counterparty/Legal Entity MDM Solution