Is the Financial Services Sector Struggling with Big Data?

A recent assessment of 300 business decision makers in the UK revealed that the Financial Services (FS) sector is falling behind when it comes to big data capabilities, particularly when scored against leadership, skills and infrastructure capabilities. This is hugely surprising. The FS industry is one that has always pursued technical supremacy. After all, a faster trading platform, lower latency transactions or better financial modelling means competitive edge. But after years of financial crisis and attempted reforms to improve the transparency and understanding of risk exposure in FS, the sector as a whole appears to be struggling to align its infrastructure, skills and leadership with the opportunities of big data.

In the survey conducted by Opinium, the sector demonstrated both a lack of data insights at speed and a lack of data prioritisations for the future. Although 56% of FS decision makers recognised the potential to drive revenue streams and better understand customers, almost half revealed that their IT infrastructure can’t move fast enough to enable the business to make better use of data. Though respondents of the self-assessment survey may have been harder on themselves than other sectors, typically already under greater scrutiny than any other sector, the survey reveals significant gaps in understanding and ability across the sector.

Understandably, decision makers raised compliance concerns as a barrier to making better use of data. Recent industry analyst reports demonstrate that the sector is struggling to comply with regulations and considerations from the Financial Conduct Authority (FCA) for recording data and procuring new technologies. And these regulatory requirements are not going away. If anything, further regulations will continue to be put in place, touching more areas of the industry. These concerns suggest that a rethink to how initiatives and frameworks are embraced by workplace cultures is required to support compliance and efficient use of data. The right skills and relationships with colleagues, suppliers and consultants will better position the FS sector for growth. 

Skills and skills sharing are also a key part of the discussion for businesses looking to use data to get ahead. Though 66% of FS organisations have data analytics technical knowledge already, leadership teams need to join the dots between data use and how this can impact on products and services. For me, this is a hugely important factor to be addressed before the industry can succeed with data.

A recent report from the European Financial Management and Marketing Association revealed that banks should focus their efforts on using data to provide better services to merchants, retail customers and other businesses – plus benefit from greater efficiencies. And yet, despite widespread recognition of the opportunity, only 14% of FS organisations have big data analytics in place, comparatively lower than the retail (35%) and public sector (40%).

Interestingly, customer insights are the biggest driver for embracing data analytics. Working across business units and securing access to customer data is the first step, but a broader commitment to working across business silos and  ensuring both structured and unstructured data can be analysed between business functions is crucial in understanding the market and new opportunities for growth.

As a heavily regulated industry, the financial services sector is understandably cautious in its approach to new technologies and the associated risks. However, it is this overly cautious approach that could bring the sector under further customer and investor scrutiny, if it continues to innovate at a slow pace. With new players and services constantly entering the market, action needs to be taken now to embrace the data revolution. Only then will longer term revenue streams and cost saving opportunities start to become reality – opening up the opportunity to take on the retail sector success.