Technology is an intrinsic part of the financial services business. However, the gap between consumer expectations and adoption of new technology versus system capabilities is widening. Growing Financial institutions (Credit Unions, FIS Firm, and Insurance Organizations) are also finding it increasingly difficult to compete with new entrants from adjacent industries such as Internet-only services (FinTech), telecommunications and retail. Indeed, new entrants are pushing the innovation envelope by partnering with leading edge platforms that can be white labeled, and offering lower pricing and improved customer experiences by capitalizing on technology.
Innovation and agility have become imperative to any business that is looking long term. As traditional revenue streams become more difficult to achieve because of unforeseen competition, we see the industry looking to innovate business models to stay competitive. The megatrends of mobility, social, cloud and big data are playing a fundamental role in driving financial services organizations to re-evaluate and transform their business strategy.
As we have witnessed here at BDO Canada LLP with our 100s of Growing Financial institutions the need to capitalize on these trends to reach retail and institutional customers in new ways, yet also transform their legacy technology to support the demand for the right experience, at the right time, through the right channel.
For the insurance market, we are particularly excited at the headway this industry is making. In a recent article from Canadian Underwriter, analytics is the number 1 priority for insurance organizations in 2017 and we will continue to see a lot of momentum with organizations moving from on premise to the cloud. “Insurers’ adoption of cloud, mobile and big data tools are set to grow, with more than half of surveyed insurers deploying some cloud-based systems”, according to a recently released report from research and advisory firm Novarica.
From a line of business perspective, we are seeing numerous CFOs now a part of the big data conversation. They are seeing that the CFO, Compliance Officers, and CIO all have a part to play in reducing costs and complexities across the numerous business functions where Big data initiatives can play a part getting them to move from spreadsheets to real-time monitoring. For Financial Service Organizations it was identified that advanced analytics initiatives were most often used for:
- Personalization: 36%
- Risk and compliance: 29%
- Customer churn prevention: 20%
- Fraud detection: 15%
According to Daryl Senick, Partner BDO Canada LLP, “few industries can derive more benefit from big data and advanced analytics than mid-market credit unions, financial services organizations and insurance companies. Nearly every transaction within this industry is executed electronically—and the amount of data generated by the industry is astounding. But our clients are struggling with this new reality.
The BDO Analytics team sees that merging the old world and the new world requires a clearly defined blueprint with set objectives and business needs. An architecture that can be defined and road mapped into a 2-3-year vision to help guide a number of the issues financial organizations will face as they look at the new advanced analytics landscape.” Senick believes that organization are jumping into prototype phases was too quick and says there are a number of failed projects because of a lack of vision for where the organizations will benefit from big data initiatives. As many forums have stated in the past, Senick says, “start slow and realize that a venture into big data is not a one and done initiative. This will require a 2-5-year roadmap that will potentially take twists and turns as new technologies from Microsoft become available to us”.
BDO Technology Solutions sees five big data challenges in 2017, that will affect Credit Union, Insurance Organizations and Growing Financial Services Organizations as they begin to embark on their data discovery engagements in 2017:
- Machine learning will accelerate, and will be increasingly applied within the fraud and risk sectors. Data-scientist demand and supply continues to work towards equilibrium. Advanced techniques will start being applied within fraud and risk that improve models and allow acceleration towards more real-time analysis and alerting. This acceleration will come from education and real-world applications of market leaders.
- Gaps will become more evident between the organizations who accelerate their data analytics programs.Each year we see banks that press the gas pedal and are ready to adopt new technology, and those that remain conservative in their efforts to run/change their organization. The stories and use cases will proliferate and become more varied in 2017, and will lead to increased evidence of strong, observable and benchmarked business returns (not just cost takeout) in the broader market.
- Data governance, lineage, and other compliance aspects will become more deeply integrated with big data platforms. In order to find a more complete and comprehensive data solution to manage compliance mandates, many growing financial services organizations develop or purchase point solutions, or they try to use existing legacy platforms that are not able to deal with the data surge. Fortunately, there are an increasing number of governance tools that insurance companies can readily make available to them to solve this issue lineage issue via Hadoop. More importantly, these new platforms can reach beyond Hadoop and into traditional/legacy data stores to complete the picture for regulation, and they are doingso with the volume, speed, and detail needed to achieve compliance.
- The proliferation of IoT and how Growing Financial Services organizations are going to leverage this data in a meaningful way. The old becomes new: this is the next wave of hype that is grabbing attention in big data, and questions abound in terms of financial services applications and the extensibility of mashing data from multiple systems. For some industries (telco, retail, utilities, mining and manufacturing) it is already a reality, and these segments have driven the need for IoT data and forced the current conversation. For growing financial services organizations, will IoT data be used more for ATM or mobile banking? Will the devices that are being placed in cars who leverage telemetry based packages see a continued uptick? Areas that are worth exploring over the coming year involve multiple streams of activity in real time and will require a clear set of requirements and a flexible architecture to capitalize on these trends.
- Risk, EDiscovery and regulatory data management. These will continue to be the top big data platform priorities. Growth and customer-centric activities sit atop the list of corporate strategies, and there will be progressive Canadian firms that can link those strategies to big data. Regardless of whether your organization is an advanced data-driven firm or not, the evolving nature of regulations, eDiscovery and the monster challenge to aggregate risk and move towards predictive analytics is still a way off, yet it’s still a requirement and acknowledged benefit at the C-suite level. Unless heaven opens and regulators ease up on their requirements, risk and regulatory data managements will still be the major challenges for financial institutions in 2017 as data now becomes an asset.
In summary, leading financial institutions are partnering with BDO Solutions Technology to make the most of their data, leveraging the Microsoft Advanced Analytics platform in ways they never thought possible 24 months ago. The Microsoft AA suite, powered by the team at BDO is a fully managed big data and advanced analytics suite that recently made some huge leaps on the Gartner Magic Quadrant. Recent technological innovations in cloud computing, big data and advanced analytics are enabling mid-market insurance, financial services, and credit unions to transform the vast stores of data at their disposal into game-changing insights across a broader set of applications, that include helping to increase sales; improve customer service; and reduce risk, fraud and customer churn.
This powerful platform, combined with a clearly defined roadmap provides BDO customers with the flexibility of an end-to-end suite across on-premises and cloud-deployment models. If your project has come to a halt, or is in need of some resuscitation don’t hesitate to call us – we would be pleased to share our learnings with you.