Powering Up Your Data Assets

How can financial institutions derive business value from their data assets? Panels at Sibos 2016, held in Geneva in late September, were full of discussions around offering better services for clients, from leveraging big data for insight and crime prevention, to delivering real-time data.

Regulators are clear that the volume of data to be collected and reported is not going to decline. Speaking at the conference, Olga Petrenko, market integrity senior officer at the European Securities and Markets Authority, said: "Yes, there is a lot of information being collected. And yes, that has an impact... But it's unavoidable, that's for sure. So the question is: how to make the most of it? How do you make sure that what is collected is being used? And is hopefully not only being used by the regulators, but is also of help to the industry?"

So how can firms "make the most of it," and turn these data assets into opportunities in an environment where customer needs have changed?

Panelists said clients and customers in securities markets increasingly expect to deal with proactive relationship managers, demand more transparency into pricing and expect data to be delivered in real time. Responses hinged on the use of technologies that help make sense of big datasets-such as cognitive computing, artificial intelligence and robotic process automation (RPA)-which dominated the mainstream events. And there were insights from the less sexy but perennially urgent discussions around data management, which moved beyond the regulatory agendas that often dominate to a consideration of how best to manage data for business opportunities and competitive advantage.

Leveraging Data Assets

Customer, account, product, compliance and transactional data can all be monetized, said panelists. One concrete example of a business benefit resulting from know-your-customer (KYC) data was provided by Patrick Craig, London-based partner in compliance technology at EY. "There is a tight cost correlation in financial crime operations, where simply adding a dataset can reduce costs. We see a 30% cost reduction in very heavy investigative processes just by adding and enriching data sources," he said.

However, cutting costs is only the starting point for making a business case, Craig added. "There is a broader business case around better risk management. Financial intelligence units are emerging at banks, looking at holistic financial crime management and trying to join the dots across [a bank's] different alerting systems."

With this integrated approach, a bank may only need to investigate a customer once, rather than having them investigated 10 times for 10 different risk infractions, said Craig. This is cheaper, more efficient for the customer and more effective in combating fraud.

Applying analytics to big data could also provide macroeconomic insights, said Jim Wadsworth, managing director of Accura, which aggregates data from roughly 11 billion transactions a year accrued by UK payments giant VocaLink in order to develop solutions that prevent fraud.

Accura sees about 90 percent of salary payments and 100 percent of state benefits payments in the UK, said Wadsworth. "Aggregating all of that can present a real-time picture of what is really going on in the economy. And that is prospectively valuable from a capital markets point of view, where you may be dependent on survey data or estimates-11 billion transactions a year tells us a lot about what is happening in the economy."

Promoting Internal Communication

To begin making the most of data assets, speakers recommended bringing together people and data from across the organization. One common theme was the importance of getting the right people talking to one another and hiring the right people as chief data officers (CDOs) and data scientists, not just looking to the right platforms or the latest technology.

Craig said the reclamation of data as an asset is linked to the rise of the CDO, as these officers pivot from trying to respond to regulatory needs, for example with KYC data, to considering how to create value around this data. That could involve starting a data working group that looks across business lines to find ways of collecting data around common definitions of customer segments, and then starts to measure the quality of the information and develop use cases around it, he said.

Eric Clapton is head of the Financial Crime Prevention unit at Lloyds Banking Group, which has been engaged for the past two years in considering how to leverage data to protect the bank and its customers. Clapton said his team did well to start off small and grow incrementally.

"If we had set out with an idea of the service we would build and the data we would get and then looked for investment, it wouldn't have gotten through our internal hurdles very quickly. But building it up in a very entrepreneurial way, with quick benefits as we have gone along, has helped bring people along on the journey," he said.

What the unit failed to do well at first was bring together different interested parties across the bank, Clapton added. But, having now improved on that aspect, "the ability to go and talk to everyone across the organization [and] pick out the key elements... has proven invaluable."

His advice was to communicate with all areas that could possibly be using data, "whether it's your change teams-because they have a good view-or your CDO, risk teams and fraud teams... Your solution will only develop if people are putting demands on it."

Harnessing Automation Potential

Panelists said technologies ranging from robotic automation to blockchain could pave a fast lane for change, but most agreed that none are a "panacea," as Brown Brothers Harriman CIO Mike McGovern put it.

McGovern's bank has begun early work with a company called Blue Prism, which provides an RPA software platform. McGovern said that while RPA is a fantastic tool for which the securities industry is "more than ready," its benefits are "orthogonal to enhancing client relationships."

"If you have that one specialist, let's say a corporate actions specialist, she now doesn't have to worry about reconciling all of the voluntary responses that have to be input and checked and triple-checked. If there is some software doing that, it frees her up and allows her to focus on providing better reporting to the clients or answering client queries. So, in that sense, there could be a direct customer relationship benefit."

Understanding 'Real Time'

Delivering value to clients is more about being able to provide real-time data, said McGovern, and this requires understanding exactly what real-time means. Brown Brothers Harriman's custodial business uses ABOR (accounting), SBOR (settlements) and IBOR (investment) books of record, he explained, adding that most securities industry operations have been using these models in the past few years.

"The key characteristic that differentiates these views is the temporal characteristics of the data, which, historically, our systems have not catered for," said McGovern. "This is because of settlement cycles being what they are and many legacy systems only able to operate as batch. Those systems can only be moved slowly and with great pain towards a more real-time use of data.

"We need to get our heads around the true meaning of the data-its granularity, its range of values, the reality of the timing," he added. "If we are going to deliver real-time data to our clients, we have to know what ‘real time' means."