By Waheed Mahmood
One of the largest issues facing the financial sector is data silos, which are repositories of data within organisations that are distributed amongst several databases and isolated from other departments in the business. They are a huge concern for the banking industry in particular, with research by WBR Insights and FIMA finding 54% of financial institution leaders believe data silos are a barrier to digital transformation and maintaining a competitive advantage in the industry.
Bank mergers and acquisitions are often the most common reason for data silos to occur, but further issues arise when legacy data is contributed by various markets and clients. Challenges also appear when organisations are reliant on legacy IT systems that are unable to handle the requirements of modern data volume and complexity – directly hindering innovation.
In order to stay competitive, financial services leaders must eliminate these silos and merge internal business and technology teams to align product and business processes.
The answer to this lies in cloud technology.
Understanding the full impact of data silos
If not tackled, data silos can impact three core areas of a financial institution:
1. Customer experience
Customer experience is a key factor in a financial institution’s ability to stay competitive, but existing data silos are currently hindering their ability to take the customer journey to the next level. Customers want social media-like experiences, demanding usable interfaces and personalised and secure experiences. However, data silos impede collaboration and make it harder to get a full picture of the customer to then personalise their experience.
2. Compliance
Financial regulators are now calling on banks to share more detailed data, most recently with the Financial Data Access (FIDA) framework. Data silos, however, mean that banks are struggling to meet these requirements and ensure perfect data collection, as their data is scattered amongst systems and departments. When banks do attempt to bridge the gap in their data with new software, this can exacerbate the existing data confusion, making it harder for financial institutions to gain a complete view of their data.
3. Innovation
Finally, data silos are also causing a barrier to financial institutions’ ability to embrace new technology. 70% of UK banking organisations are already in the pilot stage of testing generative AI, for example, to help transform their customer experience and improve productivity. But research from EXL has found that data silos are the biggest barriers to enterprise level roll outs of Gen AI in financial institutions. This is due to the ‘garbage in, garbage out’ concept, where an AI’s output is only as good as the data it gets given.
How private cloud technology can remove the barriers that data silos pose to banks
Private cloud directly addresses and alleviates these issues, as it consolidates data from numerous storage locations and maintains it in a centralised, cloud-based server. This allows employees across departments to access and share the same data in real time, helping to meet regulator demands and reduce the risk of compliance issues.
The improved data flow gained through a private cloud environment can enhance banks’ visibility of their entire operation, helping them to identify and tackle issues that could disrupt services and build a greater bottom line resilience. Furthermore, the ability to scale private cloud infrastructure allows for even more data to be managed, facilitating efficient and swift data analysis for customer personalisation. Private cloud solutions also provide strong security measures, which protect sensitive customer data during processing and storage, ensuring they adhere to strict industry regulations.
Solving an industry-wide problem
If financial instructions want to stay competitive in a crowded market, it is essential they tackle data silos sooner rather than later. Leveraging cloud technology to break down internal silos will help to modernise operations, enhance the customer experience and foster data-driven decision-making through the cloud.
However, for banks to maximise their use of the cloud, they need to ensure organisational buy-in. Now is the perfect time for banks and financial institutions to accelerate their cloud adoption strategy. More companies must recognise the proven value of unified data at a time when regulatory demands can no longer be met by legacy systems.
About the Author
Waheed Mahmood is an IT Executive with 25+ years’ experience in BFSI in leadership roles across sales, consulting and delivery. He has a proven track record of delivering value to clients and transforming their business globally, by exploiting new ways of working, methods, and technologies to underpin sustainable transformation and business outcomes.
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