Data is the Weapon to Defend Banking’s Market Position

The financial services industry's most significant competitive advantage is the availability of customer and member insights. The key is being able to use these insights to improve the consumer experience, operational efficiencies, business processes and sales effectiveness.

By Myles Suer, Chief Platform Evangelist at Informatica

According to Mike Cagney of SoFi, he is going to, “Do to banks with a smart-phone based model what Amazon has done to bookstores and Uber has done to taxi fleets.” Cagney believes there is going to be “a seismic redistribution of market cap in banking and they (existing market participants) will not see it coming until it’s done.” (“The Uberization of Banking”, Andy Kessler, the WSJ, pg. A11, May 1st).

SoFi has already turned the banking model on its head by getting its money from investors versus passbook savers. And in contrast to organizations participating in the subprime crisis, SoFi uses data and advanced analytical models to cherry pick those within its book of loans.

Providing validation for the SoFi business case are analyst firms. These firms say that most banks have not yet realized the promise of emerging digital technologies. Analysts see fintech disrupters emerging in the form of startups and established technology providers. Most use new and innovative technologies to change versus perpetuate the existing banking business model.

For this reason, analysts say existing firms need to look at how transformative technologies can put them at the center of a customer’s life. As a part of this, they must prepare to overhaul their customer relationships and service proposition.

This includes using technology to change how borrowing decisions are made. Today, these can be based upon very specific, quantifiable criteria. With the potential of a total customer view it is possible to derive “perfect” or “near-perfect” financial decisions. Responding to the opportunity, Wells Fargo announced a business lending solution that could make a decision in a day including putting the money in the customer’s bank account.

Using Data to Defend Market Position

To respond to the disruption potential that Mike Cagney and other fintech firms represent, existing banking companies need to take advantage of the opportunities in front of them to use data for business advantage.

1. Regulatory Compliance – Banks need to get control of an ever growing list of compliance requirements. Key to doing so is the ability to accurately report and show control over risk data. At the same time, banks and credit unions need to be able to not only defend their perimeter but also defend their data from cyber security attacks. If hackers get in, they shouldn’t get all your data.

To read the rest of the article about the importance of data as a defense against fintech start-ups and technology firms,  go to the complete article here ...

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