The Financial Services Industry (FSI) is experiencing a sea of changes. Overwhelming regulatory changes, the high cost of business, increasing topline pressure, and calls for financial inclusion.
“We have seen a lot of changes. The GFC [Global Financial Crisis] has significantly changed the nature of the market itself,” Sanjeev Chatrath, Managing Director, Region Head, Asia, Financial & Risk, Thomson Reuters at the recent Asian Financial Forum held in Hong Kong.
Changes "adjacent to the financial services firms" are also impacting the industry. The biggest is data. "The amount of data is mind-boggling but continues to grow. Data is the new oil of the modern industry," Chatrath said.
Concurrently, data-driven technology is shaping the industry, empowering new services and business models, bringing down industry barriers and creating deeper relationships with the end customers. Meanwhile, many firms are concerned about creating sustainable businesses that are also nimble and fast.
However, data-driven success is not about who has the most data. The secret lies in how much actionable information you can get out of it. “Oil becomes more valuable when it is refined. Same with data. It is really important to have tools that identify trusted data, search and discover useful information, and apply [data] science [techniques],” Chatrath said.
The Open Promise
Historically, Financial Services firms operated exclusively, only interacting when required. But with overwhelming data, regulatory pressure and market-defining technology, they are becoming more open to using open data platforms.
“Banks used to think we can do everything inside. Now, we are opening up,” Hecham Azzouz, Executive Director, Head of Market Making Stocks, APAC, BNP Paribas said. He added that in the past they were focused on improving executing capabilities.
Today, his firm is looking to attract new talents and technologies, changing the mentality of the employees and management on technological innovation, and looking for ways to “provide the right content to the right client.”
Doing all of these alone is difficult. “This is where the power of open platforms comes in. If you need to understand how to navigate today’s macro environment, we need to partner those with those who are agile and have the knowledge,” Azzouz said.
Standard Chartered Bank was one of the early adopters of open data platforms. For example, the Wealth Management Group used an open data platform to empower their relationship managers (RMs) with the right information.
Audrey Goh, Director of Asset Allocation & Portfolio Solutions, Wealth Management Group, Standard Chartered Bank highlighted that her bank created such a platform for ad hoc advice and combining all information for their frontline staff. “Because it resides in an app, the information is easy to access. So the time to response can be optimal and puts information at the fingertips. It is a massive efficiency driver,” she said.
One of the most significant benefits is the speed of business. Goh and her team halved the time to develop a single investment proposal. "It is an open platform where every team member can contribute. So, silos are broken down and are a productivity saver," she added.
Finding the Truth
A big challenge when dealing with voluminous data and multiple sources of data is the truth. Finding the right source of truth may not necessarily obvious, and sometimes challenging. For example, Robert Lin, Founder, and CEO, Seabury Trade Finance Exchange LLC (STFX) noted that looking at financial data of small and medium businesses is not as useful as transaction records. "Financial data for SMBs is usually a year old," he added.
Lin's firm also works with third-party firms that collect data from the end customers, instead of getting the data directly from end customers themselves. "Many corporates have ERP data that is not clean. So, we work with neutral parties who have single sources of truth. Still, there are challenges on how good the data is," he said.
Lastly, not all data are created equal. If you use an AI bot or program to analyze the data, you may end up with different results. The results themselves may not make sense to the business owners, Lin added.
Creating an open platform and gleaning the right information from the data is only half the challenge. Firms still need to monetize it and is something that every firm needs to pursue actively.
"One of the things we learned with all of our investments in data is to find out whether users are using them, and doing it in a way that monetizes the information," Goh said. She advised firms to actively track data usage and use a feedback loop to the product team. The latter allows the developers to create and optimize the products based on how the users interact with the data.
Lin added that getting the business units involved from the onset is vital. “While a lot of data are parsed and collected by technology team, they do not necessarily understand the value of data. It takes the business side to tell them what to look for. So it needs to be a collaborative effort,” he said.
Azzouz agreed. He noted that business and technology teams need to have “the same language” for open data platforms to add value to the organization.