Banks and insurance companies have one thing in common: they collect massive amounts of customer data. Due to rising customer expectations and increased competition from Fintech players, the financial services industry simply cannot afford to let the data collected go unused. Explanations.
The financial services industry has invested heavily in data collection and processing technologies for over a decade. This reality is expected to grow even more with the growth of digital consumer habits and the emergence of new forms of competition. Banks and insurers must leverage existing and future datasets to maximize their understanding of customers and gain a competitive advantage.
The impact of digital transformation in the banking industry
Disciplines such as Finance Data or Finance Data Analytics are widely employed in the banking industry to calculate risks, detect fraud, limit losses, and maximize gains. According to a study conducted by IDC, by 2025, the volume of data to be analyzed in the banking sector could reach 163 billion terabytes. Payment card use, multiplication of banking services, online transactions, dematerialization of salaries, online consultation of personal accounts, identification of customers’ consumption habits… banks have a considerable amount of information about their customers! The banking world is undergoing massive digital transformation efforts.
According to a study conducted by the Autorité de contrôle prudentiel et de résolution (ACPR), there are several reasons for these efforts. First, there is a need for easy-to-access, multi-channel digital tools that allow for seamless and perfectly secure customer paths. Secondly, there is a need for immediacy and flexibility in customer relations. And finally, there is a need to personalize the service delivered to the customer, allowing them to become autonomous. All of these needs can be met through the use of data.
The benefits of data for banks
The urgency to carry out this digital transformation, however, is amplified by various structural elements that affect the banking market. Between the evolution of crypto-currencies, the emergence of NFTs, and the appearance of new models favoring new forms of competition with open-banking and Fintech, traditional banks must not only rethink their offers, methods, and organization but also their territorial network, to maximize proximity with customers, minimize operating costs and offer a differentiating customer experience.
However, the use of data in the banking sector is not limited to customer relations.
Through data science, the financial services industry is undergoing a real disruption. By analyzing data, companies can extract valuable information through mathematical and statistical techniques. Finance Data not only allows companies to better understand their customers in order to deliver better service offers but also optimizes the profits of the banking sector – at a time when their business model is being challenged by the emergence of new players such as digital banks and fintech. Data is also used in activities such as high-frequency trading.
The stakes of data for banks
According to Verizon’s 2022 Data Breach Investigation Report, 95% of data compromises identified in the report are motivated by greed. In this context, the financial services industry is, by its very nature, a target for criminal organizations. As a designated target for cyber threats, the banking sector is also the object of particular vigilance on the part of the authorities, particularly with regard to compliance with the provisions of the RGPD. The first challenge of the banking sector in relation to data is indeed that of security and compliance. But it is not the only one.
Indeed, the very nature of banking activity allows the collection and aggregation of large volumes of data that can be of a heterogeneous nature. The banking world is therefore faced with major challenges in terms of data governance, data quality, and the continuous optimization of data assets.