07/05/2021 | Written by: Luc Goossens and Rudi De Backer
Categorized: Data & AI | Industries
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Data has become a hot topic in the financial service sector. Financial institutions are beginning to fully realize the benefits their data environment could generate but are grasping with the magnitude of the challenge of dealing with their legacy data systems. Only by improving their data governance and compliance can the financial service sector ensure that their data will be able to live up to its potential.
Data governance in finance today
When it comes to data, most financial institutions are facing a combination of four issues:
- Transforming from banking to apps
Over the past decade, financial institutions have undergone a major digital transformation as they have evolved from being a bank to being an app. As well as traditional banking information, financial institutions are now providing services based on data from external sources in their apps.However, customers still expect to receive error-free information from their bank. This expectation remains unchanged even though the app relies on external data sources. In the face of this, financial institutions need mature data governance in the form of data automation or AI in order to guarantee the quality of all external data sources.
Auditors from the government, financial watchdogs, and other authorities have always enforced financial regulations. While auditors previously accepted documentation from the financial institutions, they are now expecting to see the raw data. This increased transparency enables the auditors to view every aspect of data governance at the financial institution, along with its impact on their data. By implementing specific automation processes, it is possible for a financial institution to ensure its data is handled in a certain way, guaranteeing compliance with regulations.
Many large financial institutions have legacy data systems that are 15 or 20 years old. Newer processes have been implemented on top of these legacy systems, multiplying the complexity of the data landscape, which in turn increases the challenge of finding quality data that you can trust when you need it.It takes experienced data governance people to navigate successfully through data legacy systems. However, it has only been in the past few years that banks have started to prioritize the activities of their data departments under the control of a newly appointed CDO (Chief Data Officer), separating its role from the IT department, and implementing AI to profile and investigate existing sources of data.
COVID-19 has accelerated the move towards digital interactions between customers and financial institutions, changing customer routines and expectations and opening up new opportunities for financial institutions.Some of this impact is positive, for example, financial institutions can use these changed behaviors to reinvent their customer relationships into something more open, transparent, and secure.However, there are some negative elements. Financial institutions are facing increased competition as digital interactions make it easier to contact customers in other geographical locations. The changes have also accelerated the growth of money laundering and other financial scams, making it vital for financial institutions to educate their customers about data security risks.
IBM virtual event: improving your data governance and compliance
As we have seen, automation and AI can be utilized across legacy systems to help ensure data governance. To give a few more examples, AI systems can run system checks that support the IT department or profile databases to investigate how the data relates to each other. And automation can automate workflows to make them more manageable as well as ensuring compliance with regulations.Discover how IBM can help with your financial institution with data governance and compliance at the upcoming Benelux virtual event from the IBM Data and AI Academy. This exclusive event will bring together industry experts and data specialists from the financial services sector for virtual discussions, keynote talks, and learning groups.