Data governance and customer-centricity go hand-in-hand for today's banks

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With the rising availability of customer data, customer-centricity should be the top priority of every financial institution today. Faster moving, less regulated industries like retail and digital services have been quick to capitalise on the opportunities to improve the customer experience that data has afforded them. Comparatively retail banks, insurance and financial services organisations have been glacially slow off the mark, hampered and herded by regulation in equal measure.

Now, after years of customer data and digital projects aimed squarely at avoiding the whipping stick of the regulator, have banks finally spotted the digital data carrot? Services like Google wallet, Apple Pay and in Facebook payments are just a couple of examples of how digital giants are developing monetary capabilities to usurp traditional banks. With the emergence of services like social banking app Kitti from Santander, contactless fobs, bands and stickers from Barclays, banks appear to have finally identified and begun to chase the competitive advantages that the customer-centric approach data affords.

Ensuring implementation

The industry is starting to recognise that good data governance and data management are necessary to take customer-centricity to the next level. Unfortunately, financial institutions often learn this by accident because they are being pushed to improve their data governance by regulators and then discover the benefits to customer-centricity that can flow from this. Unless a firm has a handle on its data, it will find it impossible to meet customers’ needs. Clearly, any financial institution serious about improving its customer-centricity should be investing in data governance.

The good news is that recent research from IDC conducted on behalf of Informatica and Cognizant shows that improved customer-centricity is often cited as key reason for undertaking major technology overhauls, such as core system upgrades and large-scale harmonisation projects. However, the research also suggests that data governance projects are currently being driven by European regulators, which are becoming interested in data quality issues, and are making ever-more onerous demands for reports – to finer levels of detail and over shorter timescales.

It is true that financial institutions should see data governance investments as a way of future-proofing themselves against increasingly stringent regulatory demands. However, for financial institutions to get the full value out of their investments, they need to realise the potential for improving customer-centricity. While a regulator might want to be able to analyse data in real-time, the same might apply to a product developer, a relationship manager, or indeed an actual customer.

The pressure towards real-time is now felt just as keenly from the customer as from the regulator. As more of banking and insurance migrates towards mobile, customer expectation will be of financial partners which can provide tailored product offerings in real-time. If traditional providers aren’t able to do this, new entrants will.

Creating a data culture

Investing in data governance is the only way to satisfy these twin forces.

For this, there are a number of things a business must get right. At the highest level, the company must treat data as a strategic asset and a source of competitive advantage. If you are customer-centric, it should be easy to expand your relationship with the customer and grow the share of wallet. This means making use of the all the information held about a customer to ensure that the right products are offered at the right time. It is for this reason that data should be seen as a strategic asset rather than a cost centre or a regulatory burden.

To achieve this, a financial institution should immediately start work on changing its culture around data. One of the largest impediments to better data governance is lack of understanding through the business. Once data officers have written policies, established norms and deployed the right tools, they will have to undertake educational programs throughout the business. Employees should be made aware of how and where to access the right data for their purpose, and also how and why they should collect data in a certain way. These points ensure that a stable data landscape can be maintained, as opposed to staff going against policy and, for example, building up a new dataset for a particular project instead of accessing the golden source.

The culture of seeing data as the preserve of the IT department needs to be changed as well. At the end of the day, it is not the IT department which will be actually using the data, but product development, sales, marketing, and other customer-facing staff. Data governance should ensure that all types of data are freely accessible to those who need it, giving the best chance of the right products being developed and then offered to the right customers at the best times.

Data-driven delivery

The importance of customer-centricity is no longer up for debate. Becoming truly customer-centric, which means prioritising the needs of the customer in every decision a firm takes, will be the only way for retail banks to protect their market share as younger competitors bring a new standard of service to the market.

The old-fashioned customer relationship model of person-to-person interaction through a branch or office network is receding because the cost is too high in the face of new, digital forms of competition. As business continues to migrate online, customer-centricity is becoming, first and foremost, a problem of data.

People are now used to high standards of service from fleet-footed digital firms like Google, Amazon and Uber, and expect the same experience from their banking partners. Digital data reliant business models are also bringing new levels of customer service to different parts of the industry, and the fact that they can start with a narrow product offering and brand new technology gives them an advantage in providing a slick experience. In response, existing players must offer a more personalised experience, and make sure they are up to date with new technologies such as mobility and wearables that provide new touchpoints, in order to truly master a customer-centric business model. 

Greg Hanson is vice president business operations EMEA at Informatica.

Join MyCustomer for a dinner debate at 1 Lombard Street, London on 17th November and a breakfast briefing at the Gherkin on the 19th November, and discuss the challenges of digital disruption in the banking sector with key industry experts and fellow professionals. 

<<Find out more>>