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