The financial services industry has been disrupted. Business models, customer experience, channel delivery, and product and service offerings are all under attack. The nature of competition and the industry have radically changed strategies. Banks have to adopt a first-principles approach to business and craft a new strategy while simultaneously updating the current business to create new value.
Every institution aiming to survive and thrive into the future must adopt a digital transformation strategy centered on intelligent data integration and analytics. When appropriately used, the massive amounts of data held by financial institutions offer solutions to business, financial, and operational challenges and give innovative firms a formidable competitive advantage.
Forward-looking organizations are increasingly investing in technologies that convert financial services data into actionable insights. According to Forrester, leading institutions will be those that unleash insight from data to “insert financial services at the customer’s moment of need.”
In this article, we discuss the challenging state of today’s financial services market and how data and analytics can help organizations thrive amid disruption.
The Current State of Financial Services: Challenges Abound
Shattering events like digital transformation, fintech emergence, and the COVID-19 pandemic have made the financial services sector more challenging and demanding for institutions of all sizes. Below are five key hurdles financial organizations face today:
1. Out-of-category players eroding market share
Neobank and challenger players have grown their market share exponentially in recent years. From a valuation of $20.4 billion in 2019, the segment is projected to reach $471 billion by 2027. This growth is primarily attributed to fintech’s ability to offer more convenience and faster reaction to concerns and challenges than traditional financial institutions.
As agile financial technology firms gradually rise to the top, banks that traditionally enjoyed market dominance are challenged to remain competitive. Although many large institutions are coping with the onslaught by acquiring smaller tech-savvy competitors, other organizations are finding themselves with little choice but to transform from within.
2. Speed to change
Amid mounting competition, global banks have realized the pressing need to embrace digital strategies. According to Deloitte, 48 percent of banks are actively investing in digital technologies to maintain resilience.
That said, most firms are struggling to get significant ROI from data-related investments, primarily because of an over-reliance on legacy systems and processes. To accelerate digital transformation and reap maximum benefits, businesses are compelled to replace legacy solutions with new solutions that offer advanced financial services interoperability and analytics for agility, accurate predictions, and timely decision-making.
3. Customer enablement is a driving force in choice and loyalty
Technological advancements have triggered a cultural shift in how customers view money. While traditional clients primarily based their choice of banks on location, generational history with the bank, and cost of services, today’s market is increasingly leaning toward aspects like a bank’s reputation and the quality of interaction.
Customers, especially millennials, are more inclined to partner with institutions that offer seamless, enjoyable experiences. As a result, banks are being forced to abandon older methods of attracting and retaining clients in favor of strategies that prioritize convenient, digital-first customer experience.
4. Increasing cybersecurity and data privacy concerns
Ever-expanding financial data volumes and increasingly sophisticated cybercrime activities continue to position data security and privacy as a top concern among financial services providers. Cybercrime has been particularly prevalent during the pandemic.
According to BAE Systems’ COVID Crime Index, 74 percent of financial institutions have experienced notable spikes in cyber threats since the pandemic’s onset, signaling the unquestionable need to step out of the comfort zone and invest in reliable, secure data management infrastructure.
5. Mounting pressure for operational efficiency
Compounded by competitive forces and pandemic-induced revenue strains, efficiency ratio and associated cost metrics remain key fixtures in maintaining the financial health of the organization. PWC estimates that mainstream institutions will need to reduce expenses by 25 to 50 percent to remain competitive over the next three years. Banks will need to be laser-focused on removing redundant processes and systems, and rationalizing underperforming products, businesses, market segments, and branches.
Using Data and Analytics to Reposition Your Bank
In the increasingly challenging business environment, financial organizations can count on advanced analytics to achieve a competitive edge, accelerate growth and profitability, lower costs, and improve efficiencies. Here are four tips to leverage data to overcome hurdles and succeed during these transformative times.
1. Replace legacy systems with new-age technologies
Digital transformation is increasingly rendering legacy on-premises systems obsolete in favor of interoperable, cloud-based distributed financial networks and services, which use advanced integration to gather data from numerous disparate sources and generate comprehensive insights. A data integration solution can help you take full advantage of all your systems and data for faster, more accurate decisions.
2. Improve customer experience with analytics
Customer data delivered through online and mobile experiences is critical for appealing to Gen Z and millennials. With the right integration platform, you can access data from all relevant sources to create comprehensive cohort segmentation and client profiles. That way, you will be well equipped to anticipate customer needs and build tailored experiences for maximum satisfaction.
3. Reinforce data security with reliable data management solutions
Cybersecurity and data privacy are among the top concerns in the financial sector. With numerous data sources at your disposal, you must implement a data strategy that prioritizes keeping customer data safe. Advanced analytics can reveal data access and sharing trends to highlight underlying weaknesses and point measures like encryption and data backups.
4. Strengthen automation with AI-powered analytics
Data-driven automation is an obvious solution for reducing operational costs. With analytics, you can acquire valuable insights that help eliminate manual, time-consuming, error-prone, and resource-intensive tasks. Moreover, when reinforced with artificial intelligence and machine learning, analytics solutions can sift through massive data volumes and filter out low-quality, low-impact, and irrelevant segments for accurate insights and effective automation.
Transform Your Organization with Data
The financial services landscape is becoming increasingly complex, pushing organizations to invest in advanced integration and analytics for quick and effective responses to opportunities and risks. With data and analytics, your institution can gain a formidable edge over existing and emerging competitors, succeed in digital transformation, keep up with changing customer expectations, reinforce data security, and drive efficiency through automation.Every institution aiming to survive and thrive into the future must adopt a digital transformation strategy centered on intelligent data integration and analytics. Click To Tweet
TIBCO provides the ideal solutions for capturing financial data, unifying it, and fully unlocking its value. With TIBCO’s comprehensive, AI-powered data platform, you can convert your data into accurate, actionable insights that let you know what clients want and how you can support them proactively through their journey.
Want to learn more about current and future data and analytics opportunities for financial services and how TIBCO can help you reinvent your organization with a robust data strategy?
Download the TIBCO eBook: “Data and Analytics for Financial Services: The Strategic Currency of the Future” today.