Why data migration is foundational to digital transformation in financial services.

Data migration is the unsung hero of digital transformation in financial services. It's the key that unlocks the true potential of cloud, AI, and analytics. But it's also a complex undertaking. ?

Today, technology is the core of advances that can be made in every financial institution. Financial Services use technologies such as data analytics to better understand their customers and personalise offerings.

As part of a broader digital transformation agenda, global financial institutions are future-proofing their organisations by modernising their applications and infrastructure. This transformation is underscored by a major shift from on-premises to cloud-based infrastructure, solutions and services, through which data modernisation and business innovation can continue to evolve.

However, Business executives still struggle to overcome digital transformation challenges. Several studies have found that most organisations do not have trouble developing new ideas but still struggle to capitalise on digital transformation trends or transform their ideas into organisational goals.

The digital native customer of today wants to access finance solutions from anywhere, at any time, and this is driving most financial services to transform their products and manifest significant enhancements in their customer service. Often, this warrants a platform migration and involves the seamless movement of customer data, product contracts data, and other financial/nonfinancial data from the source system to the target system.

Data migration is, however, still one of the most challenging aspects of a re-platforming program. Data is usually deeply rooted in multiple places and silos.

Over 80% of data migration projects exceed their deadline or budget - Gartner.

Financial services handle vast amounts of sensitive data, and migrating it requires meticulous planning to maintain its integrity and meet regulatory standards. Strategies such as phased or parallel migration are often favoured to minimise risk while ensuring business continuity. This is particularly crucial in highly regulated environments where any misstep can result in significant legal or financial repercussions. You need to maintain data integrity, compliance, and operational continuity throughout the migration project, and multiple risks have to be mitigated at every stage.

Various methods exist in a smooth data migration process. The parallel method offers the lowest level of risk because the new system is run alongside the legacy system until all the bugs are worked out and the team can ensure that business processes will run properly. The phased method, however, means the data is shifted in segments, with phases designated by module, volume or another designation in the system. As each segment of data is transferred, bugs can be worked out, which could make it easier to train employees on a new system.

Data migration during re-platforming is, without a doubt, a complex and challenging process. It is, however, achievable if you leverage the experience and skills of data migration specialists adept with migration accelerators, tools, and methodologies specifically tailored to the needs of the financial services world, covering both On-premise and SaaS/Cloud migration projects. A quick, secure, effective, and seamless migration can be achieved using world-class platforms with minimal disruption to daily operations while continuously refining and improving the process. It will help those in the financial services industry to stay agile.

Often, executives view data migration as just another technology project. However, the industry is slowly seeing a shift. Companies are now strategically aligning data migration with their technology and digital transformation plans.

Some players involved in previous transformation projects still feel somewhat anxious about digital transformation and feel the gains do not necessarily outweigh the risks. Some leaders from organisations have modernised and now run on top of a more contemporary set of technologies, which has not always resulted in a spontaneous change in their businesses. In their mind, there is still work to complete the change required to realise the value of this new capability.

For example,

• 40% of financial services companies have not yet seen any increase in performance or profitability from their investments in cybersecurity initiatives over the last 2 years, and
• 43% have not yet seen any increase in performance or profitability from their investment in low-code and no-code innovation in the last 24 months.

So, how does one take advantage of what's on offer and avoid this trap? Financial services companies must articulate or re-articulate their business goals to secure greater value from all technology investment areas.

Paul Henninger, Head of Connected Technology at KPMG in the UK, says, “We can see how these contemporary technologies work, and we can understand what our strategy is going to be. There is an opportunity for excellent financial services leaders to decide what is important for how the business will run and then to harness all this capability behind that strategy.”

What are some areas of greatest value to be achieved?

• 40% of financial services companies reported greater-than-expected improvements in employee satisfaction, which could give them a critical advantage in the sector's battle for talent.
• Reducing costs by improving productivity without a plan to generate new value will likely lead to job losses. Instead, technology-driven increases in productivity should free up the sector’s workforce to focus on creating new value.

What are some of the areas still to be explored or improved upon?

• Financial services companies are particularly excited about quantum computing's potential. They now see it as a top-three technology priority for investment and understand that focusing on it will accelerate the speed at which they work, particularly as they look to harness their extensive data.
• Patching up performance gaps through intentionally targeted digital transformation.
• Leveraging productivity gains to drive value rather than just counting the cost savings.

It will be important to recognise the economic impact of digital transformation on the organisation in all respects. Ultimately, the revenue gains for organisations that become true partners to their customers will dwarf the value of cost savings.

References:

Batool, S. 23 August, 2024. 5 Best Practices for Successful Data Migration in Financial Services. Data Ladder. https://dataladder.com/financial-services-data-migration-best-practices/

KPMG. Tech Report. The Value of Digital Transformation in Financial Services.

https://kpmg.com/au/en/home/insights/2024/03/value-of-digital-transformation-financial-services.html

Maveric Systems. June, 2023. Why do banks need to care more about data migration now? https://maveric-systems.com/news-events/why-do-banks-need-to-care-more-about-data-migration-now/

Veritas Transcend. What Technologies Enable Digital Transformation? https://www.veritis.com/blog/what-technologies-enable-digital-transformation/#:~:text=Although%20many%20digital%20transformation%20technologies,popular%20in%20the%20current%20era.

World Wide Technology. 25 May, 2023. A Cloud Migration Primer for Global Financial Institutions. https://www.wwt.com/article/a-cloud-migration-primer-for-global-financial-institutions