Data is the raw material of the financial services industry. Financial advisors collect data about their clients to provide them with suitable products and services, risk experts use complex models to price insurance policies or report to management and regulators on operational risks, while traders and automated systems analyze huge amounts of market data to perform profitable transactions.
Advances in technology allow tapping into this Big Data reservoir to get deeper and actionable insights on customers, markets and risks. Value is created through more attractive products and services that address the needs of the customers, timely and informed management decision making and effective identification and management of risks. The digitalization of the customer channel via Internet, smartphones, social media and the likes is a potential source of even more valuable data to better understand the customers’ needs and connecting to them more consistently.
Invest into new technologies
As many Swiss financial services companies intend to become more customer-centric, it is essential to master and invest into technologies related to data analytics and the digital customer channel. In an environment where most change money is spent on implementing the current wave of regulation, appropriate prioritization of forward-looking investments is a major challenge.
Focus on cyber security to protect customer’s wealth, privacy and data
The high value of data does not go unnoticed by adversaries in the cyberspace as well as rogue employees and suppliers. The focus on cyber security is increasing rapidly due to many high-profile and highly disruptive/damaging security breaches threatening financial and physical damage across corporate infrastructures. The Swiss financial services industry, which has built a reputation of protecting customers’ wealth, privacy and data, has the unique opportunity to build upon its strength. Significant investments in data management and security measures are however required to meet the increasing security and privacy challenges. The likely introduction of the automatic information exchange of tax data among different nation-states even accentuates the need to properly manage and protect customer data as erroneous disclosures may have major consequences.
Next crisis in the financial services industry around IT?
All this data is processed by a complex IT infrastructure on which the financial services industry is expected to spend USD 430bn in 2014 alone (source: IDC). In our view, the next crisis in the financial services industry could revolve around IT, given the value and volume of data that the industry generates, the attraction of that data to cyber criminals and vandals, the complexity of industry’s IT systems, and the industry’s complete reliance on those systems. The complexity of the IT infrastructure is such that many companies are struggling with the implementation of regulatory requirements and lack the resources to innovate and respond to business – and customer needs. As a consequence, “agility” is a term that is rarely heard in connection with IT in the financial services industry.
We believe, however, that technology will be a key driver of competitiveness in the financial services sector. Companies that are able to find the right information from the oceans of data available to them, that leverage the required hardware and software to deliver the right products and services without breaking their budgets, and that put in place the right people and processes to construct their control environment, will thrive.
Read more in our new edition of Frontiers in Finance, which discusses the great opportunities and challenges of the vast amount of data that the financial services industry processes.