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Increasing ROI with a Data-Centric Approach for Banking: Part 1

Tom Berger
04 Jan, 2023

The nature of banking has been changing for years, and the pace of that change has only been accelerating. Data is critical to all banking institutions, large or small. Banking customers need instantaneous access to their accounts, and banks need the technology to provide those interactions seamlessly to their customers. Recently, Tom Berger, VP of Financial Services at HSO, and Asad Mahmood, VP of Data & Analytics at HSO, discussed data architecture’s impact on banks. In this two-part blog series, we look at the role data is playing in the banking industry and how HSO is helping banks of all sizes leverage their data to remain competitive and relevant.


How Banks Focusing on Data Architecture Get Quicker ROI and Time to Market

How a Data-Centric Approach Is Disrupting the Banking Industry and Accelerating ROI: An interview with Tom Berger and Asad Mahmood

Why should data-centric infrastructure matter to banks?

Tom Berger: I’m excited to be speaking with Asad Mahmood, who leads our data and AI practice here at HSO. Asad and I have had the opportunity to work together at numerous financial institutions and help these organizations work through the challenges presented by their data infrastructure.

We keep having the same conversations with many of our banking clients that focus on how important data is to these organizations. Asad, in your opinion, why is data so important to an organization? Why should organizations strive to get a handle on their data, and what is the value HSO can offer? How would you summarize that whole idea for a business?

Asad Mahmood: One thing I want to start with is to think of your own experience with banking. How often do you go to the branch now? Everything is happening through digital channels. Even if you go to a branch, you usually go just to visit an ATM to get some cash, maybe once or twice a month or less frequently. And that means that, behind the scenes, digital infrastructure is working for us, and technology is providing those banking services for us.

When everything is digital, all that infrastructure, all those apps, all those interactions, all are creating data. The size of that data, which comes into play for any bank working in today’s digital world, is enormous. And one key piece, the second one, is that this data must remain secure. We’ve all heard about data security on the retail side. But, for banking information, data security is even more critical.

Banks are expected to provide the same user experience, not simply across their branches but across other banks as well. Customers expect to have the ability to go to any branch, or even a different bank or ATM, do whatever they need, and have the same banking experience wherever they go in a fraction of a second. It’s a data movement between different apps, vendors, and partners. There’s an infrastructure that supports it.

And finally, internally, the banks need to see their members and all account transactions. Everyone’s account changes daily as they perform some banking transaction, whether with their credit cards, deposits, or withdrawals. As these transactions occur, they indicate different messages for the banks. Banks need to be on top of these changes. They need to see what is going on from the fraud perspective to be vigilant. But then they also need to see what their customers are looking for, what they’re trying to do, and then help them do it better. Internal intelligence lets a bank know their customer better, improve their experience, bring better offers, and build better products. This is all data-driven.

So, for any digital bank today, I think data becomes essential for all these things – data security, customer experience, and better products and services. And we are only going to be generating more and more data as we go along.

How can an established bank or start-up bank build a data-centric infrastructure?

Tom Berger: Let’s talk about this new disruptor, Global Digital Bank. This bank started in its very foundational state with a data-centric architecture. Can you go a little bit into how you think a bank can take a data-centric approach? And what is the value of taking a data-centric approach as they build their infrastructure?

Asad Mahmood: Banks need to have a data-centric approach to leverage their data effectively. Data-centric lets them quickly create and integrate purpose-built business applications that can interact with other applications, whether within the same bank or with other banks and industries.

This can be a problem for larger, established firms that have been operating for decades. They typically have older technology, limited integration tools, and older data patterns. To re-invent themselves, they must first change their technology and processes, which can be costly and time-consuming. But the payoff will be that they will be able to remain relevant with new products and services that customers today need and have come to expect from their financial institutions.

Video: How Zenus Bank is Building Compliant Technology and Delivering Secure Services by Partnering with HSO and Microsoft

Hear how and why a data-centric infrastructure is revolutionizing Zenus Bank

In contrast, a new bank coming in as a disruptor can be agile and nimble immediately. They can enter the marketplace already being capable of interacting with other business applications more effectively. For these organizations, whenever there’s an integration needed, it’s more of a configuration. They can hook into any other system, vendor, or app as they need to. At the same time, they have the agility to start building their intelligent apps. Having access to all the data at once lets them break down all the silos within the organization.

Getting all that information in one place will make your data scientists very happy and let them start building new algorithms. They can begin by finding anomalies in your data and creating new algorithms to account for them. And that becomes a significant advantage for a digital bank today. If they can respond quickly to these new technologies and adapt to them, that becomes a very forward kind of thinking for a bank that is just starting. And they can disrupt the market because they can start bringing new products and services to market before their established competitors can.

Just like in the world of retail, think of how the fast-fashion companies disrupted the whole high-end fashion sector by bringing new products to market faster than the established companies.

You have the same situation on the banking side; it’s the same concept. If your bank is set up in the beginning as a nimble, agile bank, you can start bringing new products to market faster than your competitors. You can create new initiatives and bring them to the market so quickly that it will disrupt the market altogether. Disruption pushes everyone else to do more.

How does data agility increase ROI?

Tom Berger: I love the analogy of fast fashion. I think most of the banks we work with are not disruptor banks. They’re existing banks, and they need to figure out how to become agile and how to generate a Return on Investment rapidly from their infrastructure investments. So, the CIO needs to demonstrate that the IT organization’s not a cost center but a profit center. And what I hear you say is that data presents an excellent way to show an ROI rapidly, almost from day one. And it also offers a great way to demonstrate agility to the business. Is that accurate?

Asad Mahmood: Definitely. The key to a data-centric approach is to be agile so that you can do whatever you need to do quickly without significant development time. By having access to the data, you have everything you need to write your apps, and you can also write the next level of services on top of that. You can build your business apps, you can bring in new providers, and you can bring new vendors as well.

So if you have one partner today but want to provide these services to other partners tomorrow, you don’t have to create a completely separate product for each of them. If you are set up correctly, onboarding a new partner is just a configuration setting for HSO, and we can open endpoints for them to bring in your white-label front end, or you can use our white-label front end on their portal or their platform. This is the same model used by many companies that provide bank cards to various institutions. It is just configuration.

The data-centric approach helps new companies become more agile, making it easier to introduce new, competitive products and services faster than their competitors. Quicker to-market and faster onboarding accelerates ROI and improves the customer experience.

Watch part 2: How Can Modern Banks Alleviate Data Exposure Risks and the Hidden Costs of NOT Managing Data Over Time?

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