The effects of flawed financial products at the heart of the credit crunch are still apparent in banking today, with financial institutions navigating volatile yet cautious markets, and regulators casting a watchful and ever-present eye. Since 2008, the capital markets may have re-invented themselves, but MiFID II, Basel III, FRTB and Dodd Frank regulation present banks with a very real challenge to profitability and agility.
It’s up to banks to create a sustainable compliance environment and keep pace with regulatory demands while keeping innovation as top of the technology agenda, and this is where analytics is proving a real game-changer. But how are banks achieving high-impact business outcomes in today’s regulatory landscape, and how can operationalized analytics help?
What is operationalized analytics?
While successful analytics focused companies can make the useful application of advanced analytics look easy, the truth of the matter is that the practical and profitable application of analytics is a complex, multistep process only a handful of companies have successfully deployed at scale. By ‘operationalizing’ analytics using the right tools, processes, best practice frameworks and accelerators, businesses, particularly banks, have been able to productionize analytical solutions. The result in many cases are consolidated analytical platforms that deliver automated results that are making a real difference in today’s strict regulatory landscape.
Enhanced analytics, operationalized at scale
PWC estimate 80% of data across all regulatory projects is the same, yet in banks, most regulations have separate data integration projects; institutionalizing redundancy and repetition. What this means is that banks may have a separate in-house or outsourced team for each regulatory framework they need to comply with - despite much of the data required for compliance being common across different regulatory frameworks.
It’s obviously an ineffective way to work, and it’s also not cost effective by any means, which is why banks are looking to analytics to help through simplification and automation. By introducing a single platform for finance and regulatory reporting, complete with end-to-end data lineage and governance, banks may be able to improve data quality and transparency and end siloed work to ensure compliance across several regulatory frameworks.
What does that mean? For the large part, it means banks are getting automation right, and that they are using it to save a lot of time and money when it comes to being compliant.
UniCredit is a very good example of analytics in action to keep pace with regulatory demands. After the financial crisis of 2008, the bank felt increased pressure for reporting to meet compliance requirements, but distributed, siloed data was creating reporting challenges. UniCredit focused on creating a common global data platform with consistent data definitions. The data platform has improved data governance and eliminated redundant data to help achieve regulatory compliance.
However, like any innovative bank, UniCredit endeavoured to make sure its platform met multiple data goals and wasn’t simply limited to achieving compliance. The biggest benefit of analytics for the bank is identifying the most profitable customers, as well as UniCredit’s innovative logical data lab where analysts can test profitability and risk scenarios on data in Italy, and take them to other markets.
In Singapore, Standard Chartered Bank is also using advanced analytics to meet the requirements of internal and external stakeholders. The company has experienced significant growth in trading volumes and diversity of products. New transaction processing systems, sophisticated business rules and accounting requirements lead to disparate accounting and revenue/expense booking. Furthermore, regulators with oversight responsibility in each country have become more demanding of granular levels of balance sheet substantiation, making finance business processes unsustainable. To face those challenges, the company introduced “Project Rubicon”, an accounting hub-driven data warehouse on Teradata IntelliFlex. With Teradata Think Big Analytics being instrumental in its design and implementation, the new solution enables a bank-wide source of financial data with summarized accounting postings based on centralized business accounting rules and details to trace back to every transaction. Since Project Rubicon has been introduced, Standard Chartered Bank significantly increased efficiency, productivity and compliance of daily reporting in comparison to traditional data warehousing, with an integration of 80 million transactional processing points from 600 sources in only 60 minutes.
In the UK, a global bank has taken a similar approach to enable organizational alignment via a single platform with integrated data, using one platform for all analytics. However, in this instance, the bank’s single solution also works across multiple brands not only supporting regulatory compliance, but also customer management, cost management, credit and fraud. It’s a great example of how using one platform for all analytics (not just for regulatory compliance) can reduce complexity and cost, and it’s also helping to improve analyst productivity by having data accessible from one place.
Compliance requirements themselves can often be a costly cross to bear, leaving banks less budget to play with from both a business and IT perspective. However, banks are all too aware that investing in regulation over innovation is a dangerous path to take, particularly in an age where customer experience is everything and newcomers to the digital banking market are upping the ante in competition to cater to unprecedented changes in consumer-driven behavior.
Ten years on from the devastating results of the 2008 credit crunch, banks have shown true innovation in meeting strict regulatory regimes using analytics across cutting edge frameworks, and we’re set to see even more innovation as banks use analytics to underpin game-changing business decisions.
To learn more about how to create a sustainable compliance environment while innovating with analytics, click here for information on Teradata Everywhere TM, a flexible, agile, scalable way to ensure a high return on your analytic investments.
Mark Perrett is Head of Financial Services Consulting for Teradata International. Mark is an experienced practitioner in all areas of CRM development, implementation and management including: Customer Value Measurement, multi-channel direct marketing, event based marketing and advanced data analytics. He has extensive business consultancy experience covering CRM, Customer Insight, Analytics, Digital Marketing, Big Data and Social Media/Social Intelligence across industry sectors.
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Mark has 33 years’ experience working in IT and analytics-related roles and has a passion for driving business value from working cleverly with data and strives to be perceived as a trusted advisor.
In addition to being a member of the Editorial Board of the Journal of Direct, Data and Digital Marketing Practice, Mark has a deep knowledge of financial services and utilities sectors and has also led high-performing analytics and marketing teams.
Mark holds a BSc (Hons) in Psychology from Lancaster University and a MBA from Henley Management College and enjoys travelling and photography in his spare time.