When it comes to collecting and storing data, the financial industry is one of the driving forces. And for good reason, because the smart use of data will be the key to success or failure in the future. But why are banks and capital management companies still finding it so difficult to generate added value from the existing mountain of data? A recent study by VÖB-Service and the management consultancy Cofinpro provides the answers.
The financial sector of all sectors – a first mover in the IT world – has so far held back when it comes to tapping into the data economy for business purposes. In a survey of experts, we investigated the reasons and asked: Why are financial institutions not exploiting their potential? The result: there is neither a lack of money nor a lack of the required raw data. Regulatory guard rails or a lack of expertise were also not identified as the main obstacles. Instead, unsuitable systems or technical hurdles in connection (58 percent), a lack of human resources (50 percent) and priorities in other areas (45 percent) are at the top of the list of obstacles. These are the findings of a survey of more than 400 experts from German financial service providers.
Why is it that you cannot fully exploit the potential of your data?
Thanks to sufficient resources and data, it should certainly be possible to develop innovative business formats or new offerings with a high degree of individualization. The fact that systems, human resources and priorities are identified as the three biggest obstacles points to a strategic problem. Are unclear guidelines and silo thinking coupled with a traditional understanding of banking preventing the entrepreneurial leap into a data-driven future?
The lack of a clear strategy is also reflected in the fact that only 16 percent of experts perceive the consistent use of data as part of the top company goals set by management. And only 14 percent of those surveyed recognized the consistent use of data for sales purposes. These are sobering figures, especially in view of the opportunities and progress that have been made in the field of data-based automation in recent years. After all, in an increasingly competitive environment, the effective use of data is crucial to improving customer focus, leveraging efficiency potential and minimizing risks.
Does your company have an overarching data strategy?
The breakdown by business area shows that financial institutions are most likely to implement a data strategy in the area of risk management. The analysis of large volumes of data is primarily used here to identify risk potential more quickly, to develop more precise risk models or to automate monitoring and control processes in order to increase efficiency and accuracy.
A data strategy is pursued IN THE FIELD:
The data strategy is weakest in the very areas where the greatest leverage can be applied to unlock business potential – for example, in product development and product optimization. This is because the analysis of customer data can lead to the development of customized services and more efficient operating processes.
Admittedly: When it comes to personal data, financial institutions have to deal particularly intensively with regulations such as the General Data Protection Regulation (GDPR). However, the legal framework offers sufficient scope for broader use here, just as it does in sales and marketing.
Data quality is decisive
With regard to data quality, it should be noted that many banks have access to a very large amount of data and that numerous technical innovations facilitate the collection, storage and provision of data. Nevertheless, there are technical weaknesses. This manifests itself in missing information, insufficient quality or missing interfaces.
Does your company have enough good-quality data to be able to use it successfully – for new AI-based applications, for example?
The institutions themselves are part of the problem in their structures: collecting data without a goal is not a success factor, but the source of a huge data swamp without clear responsibilities and accountabilities. The necessary data quality – as the basis for innovative applications and processes – cannot be guaranteed in this way.
The promotion of a company-wide data culture is therefore just as necessary as the development of a modern technological infrastructure that creates interfaces and breaks down data silos, also with regard to the implementation of a cloud strategy. It is therefore not surprising that only 21 percent of companies are exploiting the potential of the cloud. Effective data management is also necessary in the institutions to ensure that data is accurate, complete and up-to-date.
In addition to the technical aspects, the topic of data is closely linked to the organizational structure and the company’s own self-image. Interdisciplinary teams from different departments such as IT, marketing, risk management and compliance can help to develop and implement a holistic data strategy. The implementation of agile methods can increase the bank’s flexibility and responsiveness, which is particularly important in order to be able to react quickly to changes in the market and in technology.
Conclusion
It sounds paradoxical: 96 percent of the study participants attest to the importance of data in their company. This is certainly also due to the current hype surrounding the topic of artificial intelligence (AI). However, a look at the actual implementation – only four out of ten financial institutions really exploit the potential of data – is sobering. This shows that it is not a lack of knowledge, but rather a lack of a clear strategy that takes the entire organization with it and leads it into the future.
To what extent does your organization exploit the potential of data?
About the study
The study “Future data – if the bank knew what the bank knows” was conducted by Cofinpro in May 2024 in collaboration with VÖB-Service GmbH. 401 experts from financial service providers took part in the survey. The study will be published at the beginning of September. If you are interested in the study, please send an e-mail to Datenstudie-2024@cofinpro.de.