Following a drive towards consolidation of customer information systems started over 20 years ago, the financial sector is still struggling to achieve the necessary yet elusive ‘single view’ of its customers. The requirement of the Financial Services Compensation Scheme (FSCS) for all UK deposit-holding institutions to enable this single view by January 2011 now provides a clear incentive for banks to realise effective customer data integration.
Regulations and incentives notwithstanding, there is a broader business case for making data consolidation an absolute necessity. The ability to roll out new services, for example, depends on an in-depth understanding of customers’ consumer history, actions, preferences and situation, in order to market and customise offerings precisely. Often several information systems and databases can run concurrently as the result of an acquisition, or simply of satellite branches or outsourced operations running separate databases from the main office. To remain competitive, as well as meet their obligations, financial services organisations need to look beyond the department and be able to operate at the global level. This requires data integration.
Banks, and, as a result, the individuals and businesses that depend on them, cannot operate effectively without an exhaustive grasp of customer activity. For example, decision-making on lending and investment becomes more difficult when data upon which to base the lending criteria is dispersed across several departments, databases and even countries. Data that is critical to a person or organisation, such as customer shareholdings, can easily get disconnected from core records when security operations are also outsourced. The problem is compounded for corporate banks operating across multiple geographies. Mitigating risk, running crosschecks against databases and screening to implement anti-money laundering (AML) and know your customer (KYC) processes becomes impossible if data is not consistent and complete.
Listed below are just some of the many areas of banking operations affected by the lack of a single view, and some of the benefits of enabling a single view:
Obtaining a single view is still about KYC and an important part of that procedure. A bank or financial services provider needs to understand the full value of a customer in order to be able to provide the service relationship that the customer would expect. High-value customers tend to trade globally. Without an integrated view, a bank will miss interactions across its branches and in different countries, and therefore will also miss up-sell and other marketing opportunities.
The KYC process also helps monitor consumer patterns of behaviour, and holistic monitoring and being aware of a customer’s movements allow for better customer service. So a customer trip abroad can be automatically verified if their credit card is used at the airport. Applying intelligence to the likelihood of the customer’s location helps avoid the card being unnecessarily rejected while the customer is travelling.
With regards to AML, regional regulators and government agencies worldwide require banks to be aware of the ‘financial behaviour’ of their customers. As such, AML may be regarded as falling under KYC, particularly with regard to transactions involving persons and organisations identified on watch-lists, and the monitoring and tracking of their transactions. All these activities require a holistic view of all of the processes.
Customers are allowed to know where and by whom their data is seen, and both they and regional regulators can request information about the security and location of data. This puts the onus on banks to be aware of how third parties, including processing companies and call centres, are dealing with data. This opens up not just legal protection concerns, as customers can sue to force the release of information, but also political repercussions and beyond, as information linked to money transfers must also be protected by banks. A bank has a responsibility for the commercial transactions that it is involved with, so an organisation that is licensed to deal with the transaction underlying an arms consignment could potentially reveal a trail of sensitive data if it entrusted to third parties.
Conversely, economic sanctions and other regional legislation that restricts trading operations may prohibit certain classifications of trade and movement of associated payments between certain countries. To a less dramatic extent, the monitoring requirement also applies to tax compliance, as banks will hold information as to whether individuals’ tax can and should be deducted at the basic or higher rate, depending on the earnings deposited into their accounts. Banks have a responsibility to report any changes to Inland Revenue and can be penalised for reporting incorrect income, so therefore need a holistic view of customer savings in order to return the right amounts.
Capturing credit card data
A bank that has issued a credit card may have limited visibility over the customer data relating to the transactions on that card, particularly where transaction processing is managed by a separate organisation. Often, banks cannot easily track investments and activities managed by credit card companies. Setting up an operations centre is the easiest way to set up new card, but the information it generates is rarely efficiently and completely captured into an enterprise-wide single customer view.
Companies such as Mastercard and Visa typically run customer information on databases, as an outsourced concern. This has been a growing issue with outsourcing, as delivery of customer service has expanded, first with the provision of telephone banking, when call centres located outside the banks have needed real-time information to deal with customers, rather than the batch systems involving core systems which get refreshed only overnight. As a result, due to lack of integration, valuable customer information gained through third parties is delayed, and sometimes simply lost to the bank.
Marketing and customer service
The above information shortfall has significant consequences for customers’ interaction with banks. The provision of new personal banking services has tended to be via a new infrastructure for each one, rather than built into existing processes, leading to silos of information. Many banking customers experience the frustration of having to write to or interact with their bank several times in order to update an address or to get other details changed. This wouldn’t be necessary with a properly consolidated single view, where details routinely captured can easily be updated to one centralised record.
An accurate assessment of risk related to each customer is imperative, in order to provide good advice and appropriate services. This can only be determined based on a holistic view of the customer and has reputation management implications, where, for example, a mortgage company refusing to lend based on inaccurate credit scoring records could face complaints to trading standards.
The issue of scattered data is compounded for corporate banks, which require consolidated intelligence about commercial organisations that are themselves dealing with increasingly complex business networks and multiple touch points. As banks have diversified into cash management or trade services (such as invoicing) and developed relationships in different countries, it has become difficult for corporate lending departments to pull out the necessary research to justify which new international ventures to fund. This requires a full view over global corporate operations, and often can be resolved only by complex and costly manual research to retrieve and compile information from different banking divisions and locations – information that should optimally be automatically captured and pre-consolidated into comprehensive centralised customer relationship management (CRM) applications.
Integration is Key to Improving Efficiency
Maintaining a single view of the customer is about improving efficiency. Without customer data consolidation, data ends up replicated in different locations, and IT efficiency entails pulling data from a defined number of CRM data stores, rather than maintaining duplicate records in real-time at multiple locations. In order to improve data storage efficiency and for risk management purposes, banks and financial services organisations should aspire to a single view project that results in a single data store that is referenced by all enquiries and backed up in an off-site location.
The swift pace of evolution in banking services and offerings means that service delivery has never quite caught up in terms of properly consolidating CRM systems and integrating data. Integration is needed at all points of data gathering and service provision, and business-to-business (B2B) data movement consolidation projects can enable the automatic sending of changing data profiles directly to one or more systems of record, which would allow incremental improvements to the central system, as part of a phased programme. This approach allows organisations to benefit from a single system in which to store and from which to retrieve data in real-time, effectively creating a centralised view of all customers.
When there is no overall view of data, data cannot be updated in real-time, and some details may escape recording completely. The single view of the customer’s relationship with a bank becomes compromised, if it even existed in the first place. Patches may be applied to deal with imminent legislative requirements, but these ad-hoc updates will end up costing more over time, with multiple point systems to maintain. The sensible option would be to consolidate data into existing CRM systems, as, if the problem is not addressed strategically now, organisations will end up relying on a ‘spaghetti’ infrastructure that maps data sources unreliably. Sadly, return on investment (ROI) from the millions of dollars the financial services industry has already invested worldwide, in developing its relational databases for single sources of information, will continue to be compromised so long as data on business operations remains fragmented and unsynchronised.
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