News that the
Financial Services Authority (FSA) is demanding that banks
spend £1bn upgrading their IT systems so that depositors can
quickly recover their savings should a lender collapse has been
greeted as another blow to the industry. I believe that this same
investment could help banks begin to rebuild their relationships
with customers.
Effective data integration, which allows banks to profile
individual customers, and assess the quality of information it has
on each saver, investor or borrower, has a critical part to play in
implementing the changes proposed by the FSA. Fulfilling the
demands will require banks to provide a complete list of every
customer's deposits within 48 hours of the institution failing, to
ensure savers receive their money within seven days from the
Financial Services Compensation Scheme (FSCS). Achieving this depth
of knowledge about individual customers will cost in the region of
£892m, according to current estimates, but could prove to be money
well spent.
Ideally banks would have a complete, single view of every
customer on their books. They would know how much we have saved and
what our mortgage, loans and credit cards amount to, all in one
place. The truth is, however, that as most banks are the products
of mergers and acquisitions and consist of many separate divisions,
meaning that data on each individual customer's savings,
investments and borrowings can sit across several different
computer systems that do not talk to one another.
Banks have an extremely difficult time getting a "single view"
of the customer and this means they frequently miss opportunities
to provide the personally tailored help and advice that will help
them nurture better relationships with consumers.
Although this investment proposed by the FSA sounds like a great
deal of investment in terms of cost and time, especially at a
difficult time for the banks, the FSA mandate could actually have a
far-reaching positive effect on their businesses. Better
integration of data across the enterprise makes businesses more
efficient, better at cross-selling and less prone to the errors
with customer information that frequently irritate consumers.
This new FSA requirement once again reinforces the importance of
effective data integration to financial services. Banks need the
technologies and methodologies in place to be to able access data
from all parts of the enterprise and guarantee its integrity. These
same technologies and methodologies can then be rapidly extended to
analyse new data sources in the event of a collapse or acquisition.
Although the figures being quoted are certainly headline-grabbing,
banks with integration centres of excellence will find the actual
investment required modest indeed. And in a business environment
where banks badly need to rebuild relationships of trust with their
customers, this investment could be the first step in the right
direction.
Mark Dunleavy is a financial services specialist at
Informatica